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Why You Should Start Investing Early 1

Why You Should Start Investing Early

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I started investing early (as soon as I got out of college). BUT…if I can go back in time, I would tell my younger self to start even earlier. Why? It is the power of compounding interest…that’s why! Let’s take a look at why you should start investing right now.

Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

― Albert Einstein

Let me show you why you should start investing early…

start investing early!
The difference in wealth accumulated at 65 by investing $1,200 a year at 8% growth rate when you start at 20 vs 30 vs 40 vs 50 years old.

Start Investing Early!

Here is a table that shows you the difference that 10 years make. For our purpose, we assume an 8% increase per year. This is achievable for long-term investors, but in real life, you will have market fluctuation (but it averages out over time).

So how do our four investors stack up?

  • 20-yr old investor invests $1,200 a year. At 65 he’d have invested $55,200 but his account balance will be $542,280 — that is an amazing 982% gain!
  • 30-yr old investor. To have about the same amount of money at 65, the 30-yr old investor has to invest $2,700 a year (2.25 times more per year vs the 20-yr old). At 65 he’d have invested $97,200 and his account balance will be $545,590 — that is a 561% gain. Still pretty darn good!
  • 40-yr old investor has to invest $6,400 a year (5.33 times more per year vs the 20-yr old). At 65 he’d have invested $166,400 and his account balance will be $552,645 — that is a 332% gain. Still a respectable gain.
  • 50-yr old investor has to invest $17,000 a year (14.17 times more per year vs the 20-yr old). At 65 he’d have invested $272,000 and his account balance will be $556,754 — that is a 205% gain.
Age Money Invested Balance Money Invested Balance Money Invested Balance Money Invested Balance
20 $1,200 $1,296
21 $1,200 $2,696
22 $1,200 $4,207
23 $1,200 $5,840
24 $1,200 $7,603
25 $1,200 $9,507
26 $1,200 $11,564
27 $1,200 $13,785
28 $1,200 $16,184
29 $1,200 $18,775
30 $1,200 $21,573 $2,700 $2,916 2.25x
31 $1,200 $24,594 $2,700 $6,065
32 $1,200 $27,858 $2,700 $9,467
33 $1,200 $31,383 $2,700 $13,140
34 $1,200 $35,189 $2,700 $17,107
35 $1,200 $39,300 $2,700 $21,392
36 $1,200 $43,740 $2,700 $26,019
37 $1,200 $48,536 $2,700 $31,016
38 $1,200 $53,714 $2,700 $36,414
39 $1,200 $59,308 $2,700 $42,243
40 $1,200 $65,348 $2,700 $48,538 $6,400 $6,912 5.33x
41 $1,200 $71,872 $2,700 $55,337 $6,400 $14,377
42 $1,200 $78,918 $2,700 $62,680 $6,400 $22,439
43 $1,200 $86,527 $2,700 $70,611 $6,400 $31,146
44 $1,200 $94,745 $2,700 $79,176 $6,400 $40,550
45 $1,200 $103,621 $2,700 $88,426 $6,400 $50,706
46 $1,200 $113,207 $2,700 $98,416 $6,400 $61,674
47 $1,200 $123,559 $2,700 $109,205 $6,400 $73,520
48 $1,200 $134,740 $2,700 $120,857 $6,400 $86,314
49 $1,200 $146,815 $2,700 $133,442 $6,400 $100,131
50 $1,200 $159,856 $2,700 $147,033 $6,400 $115,054 $17,000 $18,360 14.17x
51 $1,200 $173,941 $2,700 $161,712 $6,400 $131,170 $17,000 $38,189
52 $1,200 $189,152 $2,700 $177,565 $6,400 $148,575 $17,000 $59,604
53 $1,200 $205,580 $2,700 $194,686 $6,400 $167,374 $17,000 $82,732
54 $1,200 $223,323 $2,700 $213,177 $6,400 $187,675 $17,000 $107,711
55 $1,200 $242,484 $2,700 $233,147 $6,400 $209,601 $17,000 $134,688
56 $1,200 $263,179 $2,700 $254,715 $6,400 $233,282 $17,000 $163,823
57 $1,200 $285,529 $2,700 $278,008 $6,400 $258,856 $17,000 $195,288
58 $1,200 $309,668 $2,700 $303,165 $6,400 $286,477 $17,000 $229,272
59 $1,200 $335,737 $2,700 $330,334 $6,400 $316,307 $17,000 $265,973
60 $1,200 $363,892 $2,700 $359,677 $6,400 $348,523 $17,000 $305,611
61 $1,200 $394,300 $2,700 $391,367 $6,400 $383,317 $17,000 $348,420
62 $1,200 $427,140 $2,700 $425,592 $6,400 $420,894 $17,000 $394,654
63 $1,200 $462,607 $2,700 $462,555 $6,400 $461,478 $17,000 $444,586
64 $1,200 $500,911 $2,700 $502,476 $6,400 $505,308 $17,000 $498,513
65 $1,200 $542,280 $2,700 $545,590 $6,400 $552,645 $17,000 $556,754
$55,200 982% $97,200 561% $166,400 332% $272,000 205%

Well, which investor would you like to be? Clearly, you want to be the one that started investing early — compounding interest at your service!

Another Way to Visualize

Instead of having the four investors invest different amount to achieve the same goal, what if they all invest $1,200 a year at 8%?

20 30 40 50
Total Balance at 65 $542,280 $242,484 $103,621 $39,300
Difference vs 20-yr old 2.24x 5.23x 13.80x

The 20-yr old investor is 2.24 times richer than investor that started at 30, 5.23 times richer than the one that started at 40, and a staggering 13.8 times richer than the one that started at 50.

What If the Growth Rate is Higher?

Well, what happen if the growth rate is 12% instead of 8%? The answer will blow your mind!

Here’s the comparison of our four investors at 12% growth rate.

20 30 40 50
Investment Per Year $1,200 $3,800 $12,100 $43,000
Difference vs 20-yr old 3.17x 10.08x 35.83x
Total Invested $55,200 $136,800 $314,600 $688,000
Total Balance at 65 $2,045,861 $2,061,875 $2,037,325 $2,058,998
% Gain 3,706% 1,507% 648% 299%

And here is the difference in wealth accumulated if they invest the same amount.

20 30 40 50
Total Balance at 65 $2,045,861 $651,118 $202,049 $57,460
Difference vs 20-yr old 3.14x 10.13x 35.60x

35.60 times difference…that is insane!

..,.Now imagine every parents invest $1,200 a year for their kids…let’s start them early.

Bottom Line

Start investing as soon as possible. When you start investing early, you are taking advantage of compounding growth and your money will growth exponentially faster.

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Why You Should Start Investing Early

by Pinyo Bhulipongsanon time to read: 2 min
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