It has often been said that exponential growth is the greatest force in the known universe. Understanding and applying this concept to your finances can help you grow your money bigger and retire sooner.
This concept also works in reverse- when you apply exponential growth to data storage, you’ll see that the cost of a gigabyte of storage has decreased exponentially over the last several decades. In 1981, a gigabyte of storage cost $300,000. That dropped to $50,000 in 1987, to $1000 in 1994, to $10 in 2000, and to approximately $.026 today.
The interest rate you’re getting on your investments is just as important as how much money you invest and the length of time you leave it invested. The rule of 72 illustrates this beautifully- at 1% it takes 72 years for your money to double, at 2% it takes 36 years, at 4% it takes 18 years, and at 10% it takes 7.2 years to double your money.
Compound interest is a powerful thing. Whether you’re investing a lump sum and letting it sit for a long time or investing a little bit each month, invest your money now and reap the rewards later. Check this infographic for more info.
