Compounding Interest Can Transform Your Financial Future
In finance, one of the most powerful strategies to help secure your financial future is starting to invest early. As financial advisors, we’ve seen firsthand how the principles of compounding interest can significantly grow wealth over time, transforming modest investments into substantial nest eggs. Compounding interest is often referred to as the “eighth wonder of the world,” and for good reason. It works by generating earnings on both your original investment and the accumulated interest from previous periods. Essentially, your money starts working for you, earning interest on interest, and over time, this can lead to impactful growth.
Let’s consider a simple example: If a 25-year-old invests $200 per month at an average annual return of 7%, by the time they reach 65, their investment could grow to over $500,000. Now, compare this to someone who starts investing the same amount at 35. By the time they reach 65, their investment might only grow to about $245,000. The difference is staggering, all because of a ten-year head start.
Starting early not only gives your investments more time to grow but also allows you to weather market fluctuations. The market has its ups and downs, but over the long term, it has consistently trended upward. By investing early, you give yourself more time to recover from any short-term downturns.
At Oxler, we encourage everyone, especially young professionals, to start investing as soon as possible. The earlier you begin, the more time your money has to grow, and the greater your potential for financial security in the future. Remember, the best time to plant a tree was 40 years ago. The second-best time is now. Start investing today and let the power of compounding work in your favor.
Masa Yamazaki, CPWA® CEPA® CDFA® is a Principal at Oxler Private Wealth®, an independent, family-owned and operated wealth advisory firm in Rye Brook and Manhattan, offering financial care to women and families. For a complimentary, no-pressure conversation, call (212) 785-2860 or visit www.oxlerpw.com. Oxler Private Wealth is an SEC-Registered Investment Adviser. Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Oxler Private Wealth does not provide tax or legal advice. The information presented is not a solicitation to buy or sell any securities or investment advisory services.