The Magic Of Compound Interest

I was checking out some of the other blogs that have been invited to blog for the Forbes.com Business and Finance Blog Network and came across Two Pennies Earned and Amy L. Fontinelle’s
Eight Financial Tips For Young Adults

One of the tips. if you want to have a comfortable and prosperous life is:

5. Start saving for retirement now.

Fontinelle mentions compound interest. It is much easier to understand the magic if you see the power this hoary chart presents. I think it was developed by Richard Russell, who writes Dow Theory Letters many years ago.

As you can see, if you had invested, when you were 19, $2,000 each year in an IRA for only seven years ($14,000), you would have more money at retirement than if you had waited seven years to start. And, as a result of waiting, you would have had to invest 11 times as much to get near the same result.

That’s a huge lesson to learn at 19!

4 Responses to “The Magic Of Compound Interest”

  1. “That’s a huge lesson to learn at 19!”

    You’ve said a mouthful…In this land of “I want it now”, the land of plastic money which offers a debt ceiling to last a life time. I’m afraid that your good advice will land on deaf ears.

  2. TF, “If I can save just one then my mission has succeeded!”

    Is that some line from a Sci-fi movie?

  3. Mike, You have me at a disadvantage; not my line, at least not from any recent posting.

    Scripture wise, there is the line, close to that which promises that if you are able to bring but one soul unto Christ how great will your treasure in heaven be; but that has nothing to do with investing, at least not in the terms of your article.

  4. TF, close enough!

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