See why starting at 16 beats starting with more money at 30.
Lesson 1 of 4
Compound interest means earning returns on your past returns. Put $1,000 somewhere that grows 7% a year. After one year you have $1,070. In year two you earn 7% on $1,070, not just on the original $1,000.
The extra is tiny at first. Over decades it becomes most of the money. That is why compounding is called a snowball: it starts small and picks up size the longer it rolls.
Change the monthly amount and growth rate. Compare starting at 16 with waiting.
$507k
At 65, starting at 16 (put in $59k)
$180k
At 65, starting at 30 (put in $42k)
$327k
Gap, mostly from extra years of growth
Assumes a steady return and contributions until 65. Real markets rise and fall; this shows the math, not a forecast.
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For learning only. Kuleana Finance explains how money works. It does not tell anyone what to buy or sell.