Compound Growth: Why Starting Early Wins

Compounding means your returns start earning returns of their own. Growth on a $1,000 investment gets added to the balance, and next year's growth is calculated on the larger number. The curve doesn't rise in a straight line — it bends upward, slowly at first and then steeply.

Here's what that does in practice. Two people each invest $200 a month and both stop at 65. One starts at 22, the other at 32. Assuming a 7% average annual return, the early starter ends up with roughly $650,000 and the later starter with roughly $310,000 — even though the early starter only contributed about $24,000 more out of pocket. (An illustration, not a promise: real returns vary year to year.)

The difference isn't the extra contributions — it's that the early money had ten more years to compound. Time is the one input you can't buy back later, which is why money invested in your late teens and twenties does more work than the same dollars invested at 40. It also means interrupting the process is costly: cashing out early restarts the clock.