Start Investing Early. Here’s Why
Here are three different scenarios, Scenario A, B and C, which explain why investing early matters!
Each scenario has a starting income of $10,000 a year (median U.S. salary in 1978). Each scenario invests 10% of income in the stock market with one important difference, they start at different times.
Here is the amount each scenario has 40 years later in 2018.
During the past 40 years, median income increased about 4% per year, from $10,000 to almost $50,000. The annual return for the S&P 500, the most widely used gauge of the stock market, has been approximately 12% per year.
However, Scenario C has much more than the others, about 2x more than scenario B and 5x more than scenario A.
Scenario C invested over 40 years, scenario B invested over 30 years and scenario A invested over 20 years.
The investment results in the graph below show the power of compounding, having your money grow for longer, and how starting early can really increase the value of your investment account.