Compound interest is your money making more money than you do. Interest that you’ve previously earned, earning MORE INTEREST.
Say you open an account today and deposit $300/month.
Let’s put it in an indexed account returning 6%, to keep it simple.
In 20 years, you will have contributed $72,000, and the account will be worth $132,400.
In 40 years, you will have contributed $144,000, and the account will be worth $557,100.
In 20 years your money didn’t even double
In 40 years your money has grown to almost 4X your contributions.
Why was the increase so significant after year 20?
Compound interest, your interest building on top of itself and making more money than you contribute.
The compounding interest starts to outweigh your contributions around year 20.
If you started saving for retirement at 40, you’d almost be at retirement age by then!
The most valuable asset in any portfolio is time; stop wasting it.
Related: Why a Healthy Money Mindset Matters