Basic Investment Concepts

The Power of Compound Interest

The following table shows why compound interest is such a great thing. Saving \$50 a month earning a 6% rate of return, can give you a nest egg of \$23,200 in twenty years. And in thirty years it can give you \$50,500. Not bad for \$50 a month.

The Beauty of Compound Interest*

 Monthly Savings In 15 Years** In 20 Years** In 30 Years** In 35 Years** \$10 (\$120/yr.) \$2,900 \$4,600 \$10,000 \$14,200 \$50 (\$600/yr.) \$14,500 \$23,100 \$50,200 \$71,200 \$100 (\$1,200/yr.) \$29,100 \$46,200 \$100,500 \$142,500

* Calculations made from a standard Time Value of Money table.

** Assumes a 6% rate of return.

Still think you're too young to start saving for retirement? If you are 35 years old and save just \$2,000 per year from now until age 65, at a 6% rate of return, you'll have almost \$167,400. But, if you wait until you are 55 to start saving, you will have to save approximately \$15,600 per year at 6% to give you \$213,000 at age 65. It's better to start smaller and earlier, and keep it up.

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