You may look at this chart and think, “No big deal, that’s only and extra $14.72.” But look what happens
when you allow that compounding interest to grow for 10, 20, or even 60 years.
Your one time deposit of $10,000 grew to $199,607.39 without you adding one more cent! That’s the gift of
time and compounding interest.
What if you put in an additional $500 a month to your original $10,000? In 60 years you’d have accumulated
$2,356,483.65 when compounded annually. Your cash investment would have totaled $370,000 of that
amount. The rest—nearly $2 million—came from compounded interest alone.
Look at what
happens when you
start with a smaller
amount and allow it
to compound for a
longer time. In the
following chart, you
started with only
$1,000. Even
though it’s 1/10th
the amount of the
illustration above,
with 8%
compounding and 40 more years, it’s also grown to over $2 million.
Figure 1.3