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The Value of Compounding

Compounding is the key to your money to work for you. The sooner you can put this power to work for you, the sooner you will see and feel the rewards. Warren Buffet says that the transfer of wealth happens from the impatient to the patient. This is key when it comes to investing. Be […]

Compounding is the key to your money to work for you. The sooner you can put this power to work for you, the sooner you will see and feel the rewards. Warren Buffet says that the transfer of wealth happens from the impatient to the patient. This is key when it comes to investing. Be patient and let your money work.

Here is an example:

Let’s say you decide to save $100/month for 10 years in your bank account earning no interest. You will save 12k. If you invest $100/month into the stock market earning an average of 7%/year you will have $17,509. By investing it, you will have $5.5k more than if you don’t invest it. 

Say you can invest $200/month. Those numbers double you have now put in 24k and earned 10.8k. This is your payment for being patient and consistent. This is over 10 years. What if you do this for 20 years? Now you will have $104.5k! You would have put in 48k of your own money and earned 56k. If you are in your 30s now and start this, then in your 50’s you will have over 100k. You will have much more if you increase how much you put in too.

I will give you an example of what it looks like to increase your deposits over time.

$100/month for 5 years = $7,301

Then you go up to $200/month for the next 5 years then you will have $24,669 after 10 years.

Then after 10 years you are able to add another $100/month, so $300/month total. Then you will have $56,449 after 15 years. Then you up that to $400/month then you will have $108,661 after 20 years.

Compounding equals free money! I show you how to see how much your money can grow if you simply get it invested. I use the S&P (Americas largest 500 companies) past returns for this example.

The sooner you start the more you will benefit from compounding. 

There are no guarantees, but doing nothing will ensure you have nothing. I don’t what that to happen to you!

The calculator used: https://smartasset.com/investing/investment-calculator

Stats on how much the median person has at different ages (scroll down a lot) https://www.epi.org/publication/retirement-in-america/#charts

Median = the person right in the middle. This is a more accurate number than average because average takes the ultra-wealthy and the “averages” out the numbers with the rest of us, so that makes the average seem higher.

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