You’ve probably heard the same old story before with money. Start early, the earlier you start the better, time is your greatest advantage to create compound interest, etc. All true statements, but they’re also vague and don’t give the emotional tug many people need to change their behavior around money.
The Truth
So here’s the truth. You have a lot of time to compound, but not as much time as you think. The hours add up to days, the days to weeks, the weeks to months, and the months to years. Then a few decades go by and you wonder where the time and earning potential went.
Too many people end up this way with their money. They’re all of a sudden in their mid 40’s or 50’s with a minimal amount of money invested. The time left to let their money compound isn’t gone yet but it’s running out.
This person is frustrated because they knew about compounding when they were young, but they didn’t take the advice or use the knowledge. Plus life happens and time passes faster than we realize.
Lots of Time, But It Goes Fast
Money rewards the investor who starts early and makes the late starter really work for it. Look at these numbers, assuming a 10 percent rate of return:
- Investing $300 per month from 20 to 65 will net $2,846,863
- $300 per month from 30 to 65: $1,073,257
- $300 per month from 40 to 65: $389,454
- And $300 per month from 50 to 65: $125,819
I don’t want to dismiss $300 per month as easy to come up with, but many people can find a way to invest that amount. The important thing to take from these numbers is just how powerful compounding is.
Starting just 10 years earlier at age 20 instead of 30, adds an astounding amount, close to two million dollars. The total contributions are reasonable at $300 per month and compounding does the really heavy lifting, especially in the later years.
What To Do
It doesn’t matter how old you are while you’re reading this. Your age is your age and you can’t rewind time or get a “re-do.” The time to invest is now.
If you’re 20, you’ve got lots of years to compound. And if you’re 50, you have less time, but that’s no reason to quit or give up.
Whether you’re young, old, or somewhere in between, invest as much as you can so your money can compound. You have time to compound, but it’s less time than you think.
