Archive for October 16th, 2009:

The Power of Compounding Interest

Written on October 16th, 2009 by Jamesno shouts

Reading through some financial publications I once again came upon a discussion of compounding interest.  Most folks have seen and heard this stuff many times, but it can’t be reiterated enough.  Especially if you are trying to explain to kids / teens / young adults to think about long term financial security.  I know – it sounds boring.  I can immediately see younger folks tuning out when I talk about this.  But the chart doesn’t lie and the numbers are amazing.  I just wish I had done this in my 20′s.  Like many folks I was more concerned with other things to think real hard about it. 

Below is a chart that I just did that compares 2 folks:  one saves $2000 a year beginning at 22 for 10 years.  The other waits 10 years and saves the same amount but all the way until retirement.  They both earn 8% annually.  Looks like the early saver wins again.