Everyone knows about compound interest. Nobody actually understands it. Because if they did, they’d be panicking about every month they’re not investing.
Let me show you the math that changed how I see time.
Important: Before investing, ensure you have 3-6 months of expenses saved as an emergency fund. The market can and will go down sometimes.
$100/Month Investment Example
Assumes 7% annual return (historical average before inflation). Real returns after inflation typically 3-5%.
| Starting Age | Monthly Investment | Total Invested | Potential Value at 65* |
|---|---|---|---|
| 25 | $100 | $48,000 | ~$262,000 |
| 30 | $100 | $42,000 | ~$180,000 |
| 35 | $100 | $36,000 | ~$121,000 |
| 40 | $100 | $30,000 | ~$81,000 |
| 45 | $100 | $24,000 | ~$52,000 |
*Illustration only. Markets go up and down. Some years you’ll lose money. Actual results will vary.
Consider tax-advantaged accounts (IRA, 401k) for better after-tax returns.
Starting at 35 instead of 25 costs you:
~$141,000
For the same $100/month investment
The coffee calculation everyone gets wrong
Financial advisors love saying “skip the daily latte and invest it.” They’re not wrong, but they’re missing the real point.
$5 daily coffee = $150/month. IF invested from age 25 to 65 at 7% return = potentially ~$393,000.
But here’s what they don’t tell you: if you enjoy that coffee and it helps you earn more by being productive, keep buying it. The real waste isn’t the coffee. It’s the $150 you spend on subscriptions you don’t use, clothes you don’t wear, food that expires.
Track your spending for one week. Find your real waste. That’s your investment fund.
Why your brain can’t understand exponential growth
Humans evolved to think linearly. If you save $100/month for 40 years, your brain thinks: 12 × 40 × $100 = $48,000.
But compound interest isn’t linear. It’s exponential. That $48,000 can potentially become much more over time, though results vary greatly.
Many people say “I’ll start investing when I have more money.” But time in the market generally matters more than the amount — though both are important.
⏰ $10/month started today beats $100/month started in 10 years. Time is the multiplier, not the amount.
The only three numbers that matter
Forget complex investment strategies. Three numbers determine your financial future:
- Time: Years until you need the money
- Rate: Annual return (historically 7-10% for index funds)
- Consistency: Monthly amount (even $25 matters)
You can’t control the rate. You can somewhat control the amount. But time? Once it’s gone, it’s gone forever. And it’s going. Right now. While you read this.
The “I don’t have money to invest” lie
Track your expenses for one month. Really track them. You’ll find money. Everyone does.
- That gym membership you don’t use: $40/month
- The streaming service you forgot about: $15/month
- The meal delivery when you have food at home: $30/week
- The brand-name product when generic works: $20/month
You don’t need to find hundreds. You need to find something and start now. Because every month you wait is literally costing you thousands in future value.
Start badly. Start small. But start today.
Perfect is the enemy of compound interest. People spend years researching the “best” investment while their money sits in checking accounts earning 0.01%.
Here’s better advice: Start terribly. Put $25/month in any low-cost index fund. You can optimize later. The important thing is to start the clock.
Because compound interest doesn’t care about perfect. It cares about time. And yours is running out.
The best time to plant a tree was 20 years ago. The second best time is now. The same applies to your first investment.