When it comes to building wealth, time is one of your greatest assets — thanks to the power of compounding. Whether you’re saving for retirement, your child’s education, or a future goal, compounding can turn small, consistent contributions into something much greater over time.

What is Compounding?

Compounding is the process where the money you earn begins to generate earnings of its own. In other words, you earn interest not just on your initial savings, but also on the interest that has already been added. Over time, this “snowball effect” creates exponential growth.

Think of it like rolling a snowball down a hill — the longer it rolls, the larger it gets.

An Example of Compounding in Action

Imagine you invest $5,000 at age 25 with an average annual return of 7%. By the time you’re 55, that one-time investment could grow to nearly $75,000 — without adding another dollar.

Now imagine waiting until age 35 to start. That same $5,000 would grow to about $38,000 by age 55. That’s nearly half as much, even though you invested the same amount — simply because you started later.

The difference? Time.

Why Starting Early Matters

The earlier you start saving or investing, the longer your money has to work for you. Even if you can’t contribute large amounts, starting small can still make a big difference:

• A $50 monthly contribution made in your 20s has much more growth potential than a $200 monthly contribution that starts in your 40s.

• Consistency is often more important than size — regular contributions help build momentum.

• Over time, compounding helps smooth out short-term market ups and downs by focusing on long-term growth.

How to Take Advantage of Compounding

You don’t need a large lump sum to get started. Here are a few simple ways to harness the power of compounding:

• Start now. Even a small amount can grow significantly over time.

• Be consistent. Set up automatic contributions to savings or investment accounts.

• Reinvest earnings. Let your money continue working instead of taking out interest or dividends.

• Stay patient. The true power of compounding shows up over decades, not months.

The Big Picture

Compounding is like planting a tree. The sooner you put it in the ground, the more time it has to grow tall and strong. The best time to start was yesterday — but the second-best time is today.

📌 Takeaway: Don’t wait until “later” to start saving or investing. Even modest steps taken today can lead to meaningful financial growth tomorrow.

Investment products are not FDIC insured, not a deposit and may lose value.