The Power of Compound Interest: Start Investing Early

1. What is Compound Interest?

• Simple Interest: Earn returns only on your initial investment.

  • Example: $1,000at5$50/year (forever).

• Compound Interest: Earn returns on your initial investment + accumulated interest.

  • Example: $1,000 at 5% =

    • Year 1: $1,050

    • Year 2: $1,102.50(intereston$1,050)

    • Year 10: $1,628.89

Key Idea: Your money grows exponentially, not linearly.

2. The Mind-Blowing Math of Starting Early

Scenario 1: Early Starter (Age 25)

• Invests $300/month at 8% annual return.

• Stops contributing at age 35 (total invested: $36,000).

• By age 65: $503,000 (yes, without adding another dollar!).

Scenario 2: Late Starter (Age 35)

• Invests $300/month at 8% until age 65.

• Total invested: $108,000.

• By age 65: $447,000.

The early starter invested 1/3 as much but ended up with more money!

3. How to Maximize Compound Interest

Start Now (Even With Small Amounts)

• $5/day\ast \ast investedat8$1.1M by 65.

• $100/month\ast \ast at8$349,000 by 65.

Choose High-Growth Investments

• Stocks/ETFs (7-10% historical returns): Best for long-term compounding.

• Dividend Reinvestment (DRIP): Automatically buys more shares.

Avoid These Killers of Compounding

❌ Withdrawing early (Resist the urge to cash out!).
❌ High fees (1-2% fees can cost you hundreds of thousands over time).
❌ Waiting to start (Every year delays costs massive future gains).

4. Real-Life Examples

• Warren Buffett: Started at 11, owns ~$100B+ today.

• Grace Groner: Secretly turned $180\ast \ast into\ast \ast$7M by holding stocks for 75 years.

5. Where to Invest for Compounding

Key Takeaways

✔ Start NOW—Time is your biggest advantage.
✔ Be consistent—Small, regular investments win.
✔ Reinvest everything—Let interest compound untouched.
✔ Think decades, not days—Patience pays.