Student Investment Expert’s Tip of the Month – May

May: The Power of Compound Interest

Why should you start investing early? The power of compound interest can make you rich just through simple saving. From 1927 to 2008, the S&P 500 (an index of the largest stocks) has grown roughly 10% per year, so I modeled a 10% return below. I ran through 2 scenarios. In the first, a person contributes $4,000 a year every year to their retirement account for 30 years. In the second set, I modeled the same thing except the person starts 3 years earlier right after they graduate instead of waiting a few years. Where else can you turn $120,000 into over $2 million? Starting 3 years earlier can make you an additional $700,000. Think about that, you can get hundreds of thousands to millions of dollars for FREE just by starting early!

Age Scenario 1:
22 $4,400
23 $9,240
24 $14,564
25 $20,420 $4,400
26 $26,862 $9,240
27 $33,949 $14,564
28 $41,744 $20,420
29 $50,318 $26,862
30 $59,750 $33,949
31 $70,125 $41,744
32 $81,537 $50,318
33 $94,091 $59,750
34 $107,900 $70,125
35 $123,090 $81,537
36 $139,799 $94,091
37 $158,179 $107,900
38 $178,397 $123,090
39 $200,636 $139,799
40 $225,100 $158,179
41 $252,010 $178,397
42 $281,611 $200,636
43 $314,172 $225,100
44 $349,989 $252,010
45 $389,388 $281,611
46 $432,727 $314,172
47 $480,400 $349,989
48 $532,840 $389,388
49 $590,524 $432,727
50 $653,976 $480,400
51 $723,774 $532,840
52 $800,551 $590,524
53 $885,006 $653,976
54 $977,907 $723,774
55 $1,080,097 $800,551
56 $1,192,507 $885,006
57 $1,316,158 $977,907
58 $1,452,174 $1,080,097
59 $1,601,791 $1,192,507
60 $1,766,370 $1,316,158
61 $1,947,407 $1,452,174
62 $2,146,548 $1,601,791
63 $2,365,603 $1,766,370
64 $2,606,563 $1,947,407
65 $2,871,619 $2,146,548

~ Monte Malhotra, Student Investment Expert, Campus Calm

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