How does the age that a person starts saving impact the amount they can earn in compound interest?

How does the age that a person starts saving impact the amount they can earn in compound interest?

Starting to save early gives you a big advantage when it comes to earning money through compound interest. Compound interest means you earn interest not only on the money you save but also on the interest that adds up over time.

For example, if you put money in a savings account or an investment, you’ll earn interest on that amount. As the interest is added to your savings, the total amount grows. Then, in the next period, you earn interest on both your original savings and the interest you’ve already earned. This process keeps repeating, helping your money grow faster over time.

The key benefit of starting early is time. The more time your money has to grow, the more interest it will earn. Even small amounts saved regularly can become a lot over many years. For example, if two people save the same amount each month, but one starts 10 years earlier, the person who started early will have much more money in the end because of compound interest.

On the other hand, if you start saving later, your money has less time to grow. Even though you can still earn interest, the total amount will be smaller because you missed out on the early years when your money could have been building up.

In short, the earlier you begin saving, the more powerful compound interest becomes, helping your savings grow significantly over time.