The Inverse of Compound Returns

At an earlier point in time, I shared why compound investment returns can make such an impactful statement about saving.

Here’s what I calculated in order to support my argument:

One dollar saved early can equal $10 saved later, when invested over time.

At an average annual return of 8% over 30 years, your savings could amount to $10.06 when adjusted for inflation at 2% each year – that means 5566% more buying power per dollar invested today!

Conversely, money saved under your mattress won’t amount to much–in fact, every dollar will only be worth one dollar with only $0.55 worth in buying power.

At that point, I thought “DAMN!”. Compound interest is undoubtedly important, but its strength was surprising even me. And if it doesn’t inspire you to start saving as soon as possible then I give up hope.

Unfortunately, compound returns aren’t being realized on a wide scale.

Not only is millennial personal savings rate currently negative (-2), this suggests many millennials aren’t saving any money but instead adding interest-bearing debt into their accounts.