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.)





$50 ($600/yr.)





$100 ($1,200/yr.)





* 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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