If I open two investment accounts for my kids and fund them with the same amount, for the same length of time, when they both turn 65, my younger daughter will have $1M more than her sister because her account will have been invested for 4 years longer.
This graph is wild for two reasons:
ONE: The difference of a few years.
4 more years of compounding takes the account from $2.6M to $3.6M, an increase of $1,000,000!
TWO: How little money it took.
It doesn’t take a large amount of money, but it does take a lot of time.
In this model, I funded each account with $165/month for 13 years, and then never added another penny. My total contribution was: $25,740
That $25k grows into:
$1 Million in 49 years.
$2 Million in 57 years.
$3 Million in 62 years.
$4 Million in 65 years.
$5 Million in 68 years.
I don’t know why they don’t teach this in schools but thank goodness that you’ve got access to this wealth of understanding to begin to learn it now.
If want to play around with some numbers to see how much your kids (or grandkids) could have because of your contributions, I made spreadsheet that will do just that.
-Wealth of Understanding