The Crazy Power of Compounding (The Chart Every Young Person Needs to See)

The growth of money (or debt) over time is one concept that probably can’t be learned early enough in life. Unfortunately, with the sad data that comes out year after year in the finance rags, there are plenty more people who need to learn: The snowball effect of compounding earnings can be quite powerful. If you have gains on your initial investments, you may then start making gains on those gains, and so on. More time invested gives more time to grow- like a snowball rolled from the top of a very long hill.

How powerful is compounding, really? Consider two investors who start at different points in their life:

Investing earlier in life can really pay off. In our example, Ron is still playing catch up despite investing far more money later in life.

Albert Einstein, the renowned scientist is often quoted for his musing on the growth of money: “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”