Simply put, it’s earning interest on interest.
Principal – The amount of money initially invested
Interest Rate – How much interest you earn
Compound Period – How frequently interest compounds – daily, monthly, or annually
Time – How long the money is left to compound
See what difference compound interest can make in the case of Julian vs. Jade.
Assuming they open the same account with a 7% annual interest rate.*
Total Contributions Saved by Age 65
Total Assets at Age 65
Time matters: Jade has about $74,000 more than Julian by age 65, despite saving less overall.
The earlier you start saving, the more exponential growth can occur. But it’s never too late. You can harness the power of compound interest at any time.
Talk to a financial professional about how you can start saving today.
*This is a hypothetical interest rate that is not representative of any specific account