Question 1

What is compound interest?

Accepted Answer

Compound interest is interest earned on both your original investment and the interest it has already earned. Unlike simple interest, compounding means your money grows faster over time because each year's gains become part of the base that earns the next year's gains. A $200/month investment at 9% average annual return grows to roughly $580,000 over 30 years even though you only contributed $72,000.

Question 2

How much does $200 a month grow over 30 years?

Accepted Answer

At 9% average annual return (VTI historical), $200 per month invested consistently over 30 years grows to approximately $580,000. You contributed $72,000 of your own money. The remaining $508,000 came from compound growth, meaning the market did more than 87% of the work for you.

Question 3

Is it better to start investing small amounts early or wait until you can invest more?

Accepted Answer

Start small and start now. Time in the market beats the amount invested. A warehouse worker who invests $100/month starting at age 25 will have more at retirement than someone who waits until 35 and invests $200/month, even though the second person put in more total dollars. The early years compound into the later years. Every year you wait shrinks your final number more than you expect.

Compound Interest Calculator

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Balance Growth Over Time

The Compounding Effect — $12.