These 3 Charts Show the Incredible Power of Compound Interest

Michael Jordan playing golf

Retired basketball legend Michael Jordan has made the most of his life after court.

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One of the biggest financial benefits is something anyone can access by opening a simple retirement account:

compound interest


Retirement accounts such as 401(k)s and Roth IRAs aren’t just savings accounts — they’re actively invested and therefore have the potential to make the most of this benefit.

As Business Insider’s Sam Ro explains, “Compound interest occurs when the interest that accrues on a sum of money in turn accrues itself.”

So why is it so important?

The charts below will show you the incredible impact compound interest has on your savings and why starting to save in your twenties is one of the best things you can do.

1. Compound interest is incredibly powerful.

The chart below from JP Morgan shows how a saver (Susan) who invests for just 10 years early in her career ends up with more wealth than another saver (Bill), who saves for 30 years later in her career. life.

By starting early, Susan was able to better take advantage of compound interest.

Chris, the third profile saver, is ideal: he has contributed consistently throughout his career.

jp morgan retirement chart

JP Morgan Fund

2. The time you start saving exceeds the amount you save.

This chart from Andy Kiersz of Business Insider also highlights the impact of compound interest and the importance of starting early. Saver Emily, represented by the blue line, starts saving exactly the same amount as Dave (the red line), but starts 10 years earlier. In the end, she contributes about 33% more than Dave over her career, but ends up with almost twice as much wealth as him.

save to 25 vs save to 35 keep saving nicer

Business Insider/Andy Kiersz

3. It can even make you a millionaire.

Compound interest can get you pretty far. In fact, Business Insider calculated — based on your current age and a 6% rate of return — how much you need to save per month to hit $1 million at age 65. You can also see calculations based on different rates of return. .

new monthly savings chart

Business Insider/Andy Kiersz

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