Compound interest is arguably the most important concept that people need to know about, especially recent college graduates. Compound interest is the initial amount multiplied by the annual interest, however that amount increases every year, so the next year you will have the previous amount that includes the annual interest multiplied by interest again. This continues and continues, resulting in more and more savings.
benefits of saving early
In this example above, it really shows the importance of investing early and how much of an impact compound interest can have on savings. By starting to save early, Susan was able to take better advantage of compound interest and in the end, saved so much more money.
The earlier you start saving OUTWEIGHS how much you save because compound interest is so powerful. If you start saving 5% of your wealth every year at 25 you will amass almost twice as much wealth in the end if you started 10 years later.
The earlier you start saving OUTWEIGHS how much you save because compound interest is so powerful. If you start saving 5% of your wealth every year at 25 you will amass almost twice as much wealth in the end if you started 10 years later.
Compound interest can even make you a millionaire. If you look at the diagram above, calculated by Business Insider, based on your current age and a 6% yearly return rate- this is how much you need to save every month to have $1 million to retire by the age of 65.