The Value of Compounding with Time
The power of compounding is one of the most valuable lessons in personal finance, yet one that most people underestimate. Recently, while driving my Tesla Cybertruck, I decided to test Grok—an AI assistant similar to ChatGPT. The experience was impressive: simple instructions, tough exercise, and instant answers with complete formulas and clear explanations.
Here was the question I tested:
“I am 2 years old. I want to save $100 per month until the age of 65. How much will I have in my account at 7% compounded monthly, and at 12% compounded monthly?”
The results were eye-opening. Exercises like this highlight a simple truth: 99% of people cannot accurately guess what consistent investing over time can do. The discipline of starting early and staying consistent has the potential to transform your child’s financial future.
If you figure out the math, you’ll realize just how powerful time and compounding really are. And if you’re wondering where that extra money might come from, you’d be surprised at how manageable it can be once you commit.
The Formula for Long-Term Growth
The key is to start investing early. A disciplined approach to saving, paired with quality investments, can unlock extraordinary results. Focus on aggressive, high-quality growth stocks for the long term. Don’t worry about short-term fluctuations—markets go up and down, but time rewards patience.
Diversify across 20–25 well-established companies, and then let compounding do its work. Over decades, the results can feel like magic.
A Word of Caution
This is not stock advice. It’s simply an idea to think about. Always invest only what you are comfortable with, and consult your financial advisor before making decisions based on your unique circumstances. While I believe strongly in this principle, the right choice is always the one that works best for you.
More Than Real Estate
On Track Realty has been serving clients with honesty and integrity since 1994. Located in Edison, serving many parts of NJ. Our experienced team promises to put your interest first, whether you are buying or selling, Residential or Commercial. Call us at 732.494.2211 or visit us at www.ontrackrealty.com to learn more about us. Clients first, that's our promise and commitment from day 1.