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If you started investing at 25 vs. 35, you could end up with almost a million dollars more.
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If you started investing at 25 vs. 35, you could end up with almost a million dollars more. And this is if you still invest in the same amount each and every month. And that's not a typo. That's what happens if you let 10 years work for you instead of against you. In this video, I'm going to walk you through exactly why it's so important to invest now instead of waiting till later, give you an analogy so you can really understand the power of investing and why it's so important, and lastly, help you understand how this can also work against you when it comes to debt.
Let's say two people each investing about $500 a month. And let's say for simplicity's sake, they return about 8% average, and they both decide to retire 65. Say person one starts at 25, and person two waits 10 years later and starts investing at 35. By 65, person one ends up with 1.5 million dollars.
While in the same time, person two, who made the same contributions, only ends up with $680,000. That's almost a million dollars difference in just that 10-year difference. Now, here's what gets me. To close that gap, person two wouldn't just have to invest a little bit more. They would have to invest almost double as much as person one just so that they can end up in the same destination.
Now, this is the true power of compound interest. Let me give you another analogy. Imagine two friends driving the same distance. Friend one decided he wants to leave right now. Now, he's rationing, taking breaks whenever he wants to, driving at the normal speed limit, and he gets at his destination in a timely fashion.
Now, while friend two decides she wants to wait 10 years later. Now, for her to arrive at the same destination at the same time, she can't just drive the speed limit. She'll have to put pedal to the metal and drive significantly faster to try to make it at the same time. And this means speeding up the whole way, skipping breaks, and pushing the car a lot farther than what it needed to go.
And even still, she may show up late. In this analogy, compound interest is the road. And the earlier you're on the road, the more work it does for you. And the later you start, the harder you're pushing the gas trying to get to the same destination. Now, this cuts both ways. Compound interest isn't just something that builds your money.
The same force is working against you, especially whenever you're carrying high-interest debt. Every month you wait, the debt is compounding, too, just in the wrong direction. So, the same principle that's rewarding you for starting investing early is also the same principle that is hurting you for waiting longer than you needed to to get out of debt.
That's why it's so important to understand these financial concepts so you can start building your own financial future. Thank you, and I pray you have a wonderful day.
This video is for general educational purposes only and is not personalized investment, tax, or legal advice. Every situation is different. Talk with a qualified professional about your circumstances before acting. PLC Wealth Partners is a registered investment adviser. See our disclosures.
