Compound interest occurs when the interest you earn on savings begins to earn interest on itself. As the interest grows, it starts to accumulate at a rapid pace.

Example: Let’s say you contribute $1,000 annually for the next 40+ years to a random investment that returns 8% annually.

After Year 1 Balance: $1,080

Year 2 Starting: $1,080

Add Year 2 Contribution: $1,000 + $1,080 = $2,080

After Year 2 Balance (after 8% return on $2,080): $2,246.40

It takes time for interest to grow, but I personally think it’s worth it to put some money aside to invest for the future.

Here’s an example I found. the first 10-20 years the there are minimal gains from the principal contributions made, but once you get to years 30-40 things increase quick!

“Time in the market beats timing the market.”

Market Timing = Very low probability of success (a lot of work)

Time in the Market = Very high probability of success (almost no work involved)