James Rothschild Nicky Hilton could definitely teach a class on how to use compound interest. But here’s the best part: compound interest works for everyone who is prepared to start early, not only millionaires. Picture a small snowball at the top of a hill. Push it and see what happens as it rolls. At first, it doesn’t look like much. Then, when it is left alone, it collects more snow, speed, and size until it moves along like a freight train. That’s what early investing is all about.
Time isn’t just money; it’s money that grows over time. Imagine two friends: One person starts investing at 22 and puts in $200 every month. The other one waits until 32 to start, but they both invest the same amount each month. By the time both are 62, the early bird has more than just a little bit more; it’s often double or more. They just gave their money more time to work. The funny thing is? Neither of them worked harder for the money. Their money just had more birthdays.
Let’s take a quick detour to talk about the famous miracle of “compound interest.” It is said that Albert Einstein termed it the eighth wonder of the world. The feeling is still there, even if he didn’t. It’s interest on interest, and it keeps going around and around. The effect is stronger the more regularly your assets grow. Think of a bucket filling up with rain and then, all of a sudden, another bucket appears because the first one started to overflow. Your money grows every year, first slowly, then all at once.
That’s why people say, “The best time to plant a tree was 20 years ago.” Now is the second-best time. Investing early may not seem like a big deal, but it’s like planting seeds. Give them sunlight (patience) and water (regular donations). Years later, what started as a mustard seed could grow into a huge oak tree with roots that go deeper than you can imagine.
Let’s speak about risk for a moment. Markets go up and down, and sometimes they do flips. But having more years on your side gives you more chances to bounce back when things go wrong. Early investors can weather the storms without being scared. Think about how different it would be for a tightrope walker to be on a wire three feet off the ground and another fifty feet up. The wire feels safer the sooner you start investing, even if you wobble from time to time.
A lot of folks are afraid they don’t have enough to start. That’s not true. Five bucks. Ten bucks. With the simplest investment, you can get your foot in the door. There are many instances of people who make money every day and build up their portfolios over time, not with big wins but with piggy banks. It’s normal, steady, and even a little dull, yet that’s where the fireworks end up, decades later.
Graphs and financial jargon can be too much for most individuals. Don’t think too much. Funds that track an index. Stocks that pay dividends. Don’t worry about the hard work; just trust time to do it. Making smart decisions is always better than that one lucky trade that people talk about at parties.
Things happen in life. Sometimes you don’t have any money to invest for a while. That’s how it is. Investors who get on the train early and take a nap for a stop or two still have a wonderful view when they retire—they simply need to get back on.
So, as soon as you can, start with what you have and where you are. Your future self will be grateful to you. It might send you a piece of cake with dividends on top and a message that says, “You beat the system.” Good for you.