TEENAGER VS ADULT WITH COMPOUND INTEREST


Investing & Money
piece written on the 18th September 2014 by  

I’ve touched on this sort of subject before, but I wanted to take this opportunity to write about it again because of it’s importance. It’s never too late to start investing and the best moment to start is now, but if you’re one of the fortunate people who get to start when you’re still in your teens, you’re going to be really thankful and I’m going to show you why.

Let’s look at two people:

  1. Susie – Aged 19
  2. Ricky – Aged 27

Susie decided to start investing R2,000 a year from the age of 19. He went with a conservative fund that yielded roughly 12% per year. At age 26 Ben stopped putting money into his account and just left the R16,000 that had accumulated in there.

On the other hand, Ricky only started investing his R2,000 per year and did so all the way until he was 65 years old. He got the same 12% return as Susie, but he invested for 23 more years than Ben. Ben had his R16,000 and Ricky’s deposited amount totalled R78,000.

When they both turned 65, they compared their investment accounts and here’s what the outcome is:

Susie has R2,288,996 and Ricky had only R1,532,166

Here’s a good graphic representation:

invest

That’s quite incredible isn’t it, it shows the pure power of compound interest, something not to miss out on!

Hat Tip Dave Ramsey for the numbers.