The Power of Compounding To Build Wealth

Written by John Macy, Financial Coach, MBA, Retirement Income Certified Professional® (RICP)

Ready to build your financial future?

"Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't, pays it."

Attributed to Albert Einstein

Did you know that you don't need a lot of money to start building significant wealth? The secret lies in a powerful principle called compounding. Whether you are earning interest on bonds, or dividends and capital gains from stocks, it’s the magic of earning “interest on interest”.  Each time you earn interest or dividends or capital gains, if they are reinvested you will buy more bonds or more shares of stock.  As a result, every month or quarter you will earn interest/dividends/capital gains on both your initial investment and also on the new bonds or stock shares (purchased from the previously earned interest, dividends, or capital gains). The earlier you start, the more powerful it becomes!

Compounding Illustrated

Let's look at the numbers. Imagine you consistently invest a small amount each month into an account with an average return of 8% per year.

The charts below illustrate how much investing just $100 per month could grow to:

• $58,900 after 20 years (only contributing $24,000 total)

• $149,000 after 30 years (only contributing $36,000 total)

• $349,100 after 40 years (only contributing $48,000 total)

Saving $100/Month for 20 Years 

Saving $100/Month for 30 Years

Saving $100/Month for 40 Years

Even at $50 per month, the results are still impressive!

Don't wait for the "perfect" time to start. The best time is always now. Small, consistent steps can lead to an incredible financial future. Start your journey today and find your path to financial freedom. Contact me or visit www.flourishingpathfinancial.com/book-online to schedule a consultation.

Author:  John Macy, MBA, RICP®

John Macy is a professional financial coach and the founder of FlourishingPath Financial Coaching. With over six years of experience as a financial coach, John helps pre-retirees and retirees design resilient portfolios and income streams for their next act. Read his full story here.