Financial Planning Fridays #17: Compound Growth

Today we wanted to talk with you about just how powerful compounding over time can be. Albert Einstein said that Compound Interest is the eighth wonder of the world. Our clients are often surprised at how large their investments are projected to grow when we look at their long-term financial plans. When we calculate how your wealth can grow over multiple generations the figures can often become life changing for your family.

Jerry’s children are blessed to have wonderful relationships with their great grandparents. They were born in the late 1920s and early 1930s. During their lifetimes, The S&P 500 has grown at an average rate of return of just over 9.6% per year since the start of 1930. And a $1,000 investment made then with no additional contributions is worth more than $5 million today.

Let’s review the current value of a $1,000 investment made at the start of each decade through the end of September 2022.

For every dollar that was invested in 1980 are worth more than $100 today just 43 short years later.

Let’s also take a look at the value of a $1,000 initial investment but also includes an additional $10 investment each month.

The projected wealth becomes even more extraordinary. Many of the investments became two-to-four times larger because of that consistent $10 per month. The more volatile the markets were—especially in the early years—the larger the wealth grew to.

The conclusion that we can draw from these charts is that even relatively small investments can become extraordinarily large when left to grow and compound for a long enough time. Because of this it is especially important to make investments early in life if possible and then consistently save throughout your life.

At Presilium, we are always happy to update your financial plan to show you, or your children and grandchildren, how the power of saving and investing in a disciplined manner early can significantly impact the trajectory of your wealth over decades, or even multiple generations of your family.

Please share this with a friend or family member who may be interested in seeing how the power of compounding can also work for them.

Be on the lookout for our next Financial Planning Fridays episode. Subscribe to our Youtube Channel so you never miss an episode. Or contact us directly; schedule your 15-minute call with us today.