Lesson 8 - The power of compound interest

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Start now and save often

If you’re trying to save money, it can be wise to take advantage of compounding growth—and do it as soon as possible.

What’s compound growth?

A return that includes both the initial principal and the accumulated growth from previous periods. When there’s a return on investments, those returns are reinvested in the account and can then generate returns of their own. 

How does compound growth work?

It’s helpful to understand how interest compounds to estimate how your money can grow. The more often your funds are compounded, the more compound interest you’re likely to earn—and the more likely your money can grow. Conversely, the slower the interest on your debts is compounded, the slower your debt can grow.

Example: A hypothetical mutual fund in a retirement account with an initial investment of $5,000 could become $40,582.49, assuming an average return of 7% compounded monthly over 30 years. If you added monthly contributions of $200, you could have $284,576.69 in 30 years time.¹

Want to try it out? Check out these handy compound growth calculators:

Consider compound growth a double whammy

Your money (that’s the growth your initial investment may have earned) can earn more money (that’s the compound growth), just by sitting in the account!

The power of staying invested

The chart below demonstrates how a hypothetical $10,000 investment could have grown in the stock market over 30 years, from 1992 until 2022. In this example, we use the S&P 500 Index as a proxy for an investment in the stock market.

Power of staying invested

Past performance, including hypothetical performance, is no guarantee of future results. Investing is subject to risk, including the risk of loss. S&P data © 2023 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with an actual portfolio. Chart is for illustrative purposes only. See more information below.²

This chart does have its ups and downs, but these represent market fluctuations. If you had kept that money invested throughout this period, your $10,000 investment could have grown to over $173,000 by the end of 2022. However, if you got nervous during the 2009 financial crisis and decided to take all your money out of the market, your investment could have been worth only about $29,000 at that time. 

If you kept your hypothetical $10,000 in the market over that period, the compound growth could have accounted for $163,000, or 94%, of the $173,000 total you might have ended up with. As the adage goes, it’s not about timing the market, but time in the market.

Claudia Newman manages the Retirement Education team that helps onboard employees to their Human Interest plan and explains the benefits of a 401(k) plan by offering live training. She has been working in the 401(k) and retirement plan industry in several capacities, including relationship management, sales, and back-office support since 2010.

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Source: Human Interest calculations. For informational purposes only. Ending values do not reflect the effects of taxes, asset fees, market fluctuation, or investment expenses; if they did, results will be lower. Does not reflect market fluctuation, the performance of any Human Interest account or any actual investment. There is no guarantee that the assumed rate of return will be achieved or that any systematic investing plan will be successful. Actual results will vary. Investing is subject to risk, including the risk of loss. Earnings and pre-tax contributions are subject to taxes when withdrawn. Distributions before the age of 59 1⁄2 may also be subject to a 10% IRS penalty.


Source: NYU Stern School of Business data and Human Interest calculations using Historical Returns on Stocks, Bonds and Bills: 1928-2022. Stocks represented by the Standard and Poor's 500 Index, often referred to as the S&P 500, which is a commonly used stock market index. It tracks the performance of stocks of 500 large companies listed on stock exchanges in the United States. Bonds are represented by the United States Treasury Bond, which are government debt securities issued by the U.S. Federal government that are sold in 20- or 30-year terms. Bills are represented by 3-month Treasury Bills, which are short-term debt obligations issued by the United States Department of the Treasury. Investing is subject to risk, including risk of loss. Past performance is not indicative of future results.  Performance data shown is as of 12/31/2022 S&P data © 2023 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.


The (k)ickstart™ program is administered and offered by the recordkeeper, Human Interest Inc. ("HII"). HII's subsidiary and registered investment adviser, Human Interest Advisors ("HIA"), receives a fee based on assets under management. As such, HIA will earn more in asset-based fees if a plan participant increases their contribution in connection with the program.