The Magic of Compound Interest (And Why You Should Save for Retirement While in College)

If I could go back in time to do college over again, I would have started saving for retirement.

You see, I never really thought about compound interest – and how by investing early in life – I could multiply my money faster.

I also didn’t realize that by simply investing a small sum each month could help me on my path to saving a million dollars.

Investor.gov has a great compound interest calculator to help you discover how much you could save based on different monthly payments, interest rates, and years to grow. In the example below, I show that by initially investing $1,000 and adding an additional $200 per month, you could reap over $1 million dollars at a 7% interest rate after 50 years.  I know 50 years is a long time, but the point is for you to see how investing a small sum over a long period of time can help you multiply your money.

However – if you waited to save until later – you would need to save about $900 per month for 30 years to earn $1M at the same 7% interest rate.   Check out the drastic difference in monthly payments just because you waited:

The earlier you start investing, the more your money will multiply. Conversely, the longer you wait, the more money you’re losing.

So start planning a retirement fund today.

Even if you can’t afford $200 a month – that’s okay.  Just commit to investing a certain sum of money every month – and watch your money grow.

As you get older – and earn more money – you can save even more in your retirement funds.

Just focus on starting to plan for retirement now.  You’ll be glad you did.

If you have time, check out this awesome video by Jim Wang (Bargaineering.com) as he talks about the true power of compounding interest:

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