Pure’s Associate Advisor, Joesph Hodapp, CFP®, AIF®, reveals how compound interest can strategically leverages returns to make your money work for you.
Transcript
Have you ever heard the phrase, “Let your money work for you”? That’s exactly what compound interest is all about — your money earning money, and then those earnings generating even more over time. We’re often told to “save more,” and that can feel overwhelming — especially during our working years, when we’re just trying to make ends meet.
But here’s the truth, every dollar you save and invest today can have a meaningful impact on your future. I’ve seen so many clients amazed by how far their money can grow when they stay consistent. Compound interest truly rewards patience. The more you can save now, the more peace of mind you’ll have later.
Here’s how it works. When you invest, you earn returns — maybe through interest, dividends, or growth. Instead of taking those earnings out, you reinvest them. Now your larger balance starts earning returns, too.
For example, let’s take Jill, age 25. She invests $200 every month until age 65, assuming a 6% rate of return. By the time she reaches 65, she’ll have accumulated roughly $400k.
Now let’s look at Jack. He waits until age 35 to start investing that same $200 a month, earning the same 6% return. By age 65, Jack ends up with about $200,000.
By starting just ten years earlier, Jill finishes with almost double what Jack has — and she invested only $24,000 more out of pocket. That’s the true power of compound interest. Time and consistency matter far more than timing the market or chasing high returns.
Albert Einstein supposedly called compound interest “the eighth wonder of the world. those who understand it, earn it; and those who don’t, pay it.”
To understand how compound interest could shape your financial future and to find the best ways to invest your savings today, schedule a complimentary financial assessment with our team.
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IMPORTANT DISCLOSURES:
• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC, a Registered Investment Advisor.
• Pure Financial Advisors LLC does not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
• Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
• All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.
• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.
CFP® – The CERTIFIED FINANCIAL PLANNER® certification is by the CFP Board of Standards, Inc. To attain the right to use the CFP® mark, an individual must satisfactorily fulfill education, experience and ethics requirements as well as pass a comprehensive exam. 30 hours of continuing education is required every 2 years to maintain the certification.
AIF® – Accredited Investment Fiduciary designation is administered by the Center for Fiduciary Studies fi360. To receive the AIF Designation, an individual must meet prerequisite criteria, complete a training program, and pass a comprehensive examination. Six hours of continuing education is required annually to maintain the designation.
