The Power of Compound Interest

"The most powerful force in the universe is compound interest." - Albert Einstein
Yes. As what Albert Einstein said, we should not under estimate the power of compound interest. Many knows how it works but not many actually knows it's power is strongly related to the time you start putting in your capital. In other word, WHEN you actually start your saving? Let's take a look at the example below:

Let's say Albert and Einstein both are 22 years old and wanted to retired at age of 65. Albert saves $2,000 yearly into the account which produce 12% of interest. This account will compounded it's interest yearly and added on top of Albert's next year savings. Albert only planned to save for 6 years period which is a sum of $12,000 and he did not put in another single cent from 7th years onwards. However the account will keep compounding the interest.

As for Einstein, he decided to save into the same account which produce the same 12% annual interest, but he only started the saving 6 years later, which is after Albert has stopped the saving. Knowing that he's a bit late compare to Albert, Einstein decided to save in $2,000 every year until his age of 65. His total saving capital will be $2,000 x 38 years = $76,000. However, due to Einstein started the saving few years later than Albert, although he saved 6 times more than Albert, yet he is only getting the similar amount as Albert's retirement fund.

Age	Albert	Einstein
22	$2,240	$0
23	4,509	0
24	7,050	0
25	9,896	0
26	13,083	0
27	16,653	0
28	18,652	2,240
29	20,890	4,509
30	23,397	7,050
35	41,233	25,130
40	72,667	56,993
45	128,064	113,147
50	225,692	212,598
55	397,746	386,516
60	700,965	693,879
65	1,235,339	1,235,557

Now you can really see the power of compound interest. The moral of the story is: Save early better than later, every single year counts.