20 Second Advisor: This Is CRAZY Math!

You may have heard the terms “Time Value of Money” or “Compounding Interest”. Rather than define them, let me show you a quick example which will make them come alive!

  • You begin saving $1,000 / month when you turn 40 years old
  • You save the same amount for 30 years
  • You earn an average annual return of 8% during this time
  • How much money do you have when you turn 70? $1,500,000
  • How much did you actually save? $360,000

Think about that…you saved $360,000 over 30 years and you ended up with $1,500,000!

That’s the power of compounding interest. Are you saving enough each month?

This is an illustration only. We compounded the investment return monthly. This assumes you have $0 saved at the beginning. We are not and can not guarantee an 8% annual return.

2 Comments

  1. John pitt on March 6, 2019 at 5:24 PM

    An 8% return is pretty optimistic isn’t it? Some years yes but seems many years less.

    • Taylor Stanfill, CFP® on March 11, 2019 at 12:10 PM

      Hey John, we are referring to a long term average return. The actual return each year will almost always be higher or lower than this, but, for a typical growth oriented portfolio, this is a reasonable estimate over the long run. Of course, not everyone is invested in a growth oriented portfolio and this is simply an illustration to convey the power of saving over time. Let us know if you have additional questions!

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