Compound interest is often called the eighth wonder of the world. It is the snowball effect of your money earning money, and then that money earning more money.
How It Works
Linear growth is 2 + 2 = 4. Compound growth is 2 x 2 = 4, then 4 x 2 = 8. Over time, the exponential curve becomes vertical. The key ingredient is time.
The Cost of Waiting
Investing $500/month starting at age 25 yields significantly more at age 60 than investing $1,000/month starting at age 45. The early dollars have decades to compound.
Frequently Asked Questions
What is a good return on investment?
Historically, the stock market averages about 7-10% annually after inflation.
How do I start investing with little money?
You can start with micro-investing apps or fractional shares with as little as $5.
Is investing risky?
All investing carries risk, but diversification helps manage it over the long term.
Conclusion
You don't need to be rich to become wealthy. You just need to be consistent and patient. Start today, no matter how small the amount.