Compound Interest

Compound interest is how the value of an investment earning interest can grow over time.  To illustrate how compound interest works, let's explore this hypothetical example:

Meet Jane. On her 25th birthday she invested $15,000 earning 5.5% annually.  After 10 years, Jane has over $25,000. That's because not only did her initial $15,000 earn interest, but her earnings ALSO earned interest over those 10 years.  That's how the concept of compounding - usually called as compound interest - works.

Now, meet Mitch.  He also invested $15,000 but not until his 45th birthday. Mitch's investments also earned about 5.5% each year.

By the time Jane turns 50, her original investment $15,000 at that average 5.5% rate has now grown to more than $57,000 – without one extra cent of savings.

On the other hand, since Mitch invested at 45, by his 50th birthday his $15,000 investment is only worth about $19,600.  

Learn more about these savings resources:
The Power of Three: Time, Money, Return https://www.edwardjones.com/preparing...

When should you start saving? https://www.edwardjones.com/preparing...

Create your own hypotheticals with these financial calculators: https://www.edwardjones.com/preparing...

Or to discuss a personalized investment strategy for you, please use our locator to find an Edward Jones financial advisor near you. https://www.edwardjones.com/find-fina...

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