# Why I wish they’d taught me about compound interest at school

Were I able to go back in time to impart one piece of wisdom to my teenage self – one nugget that would have made all the difference to my financial future – I would somehow engineer the absence of my maths teacher for a single lesson.

Then, heavily disguised as fresh supply teacher meat, I would instruct the class in the power of compound interest.

It wouldn’t take long, needn’t tear a hole in the fabric of space-time, and it would have made a far deeper impression on me than another drone-a-thon about quadratic equations.

Because everyone likes the idea of money for nothing.

Alas in reality what little money I did lay my hands on at that time went on instant gratification. You know how it goes.

If only I had understood what a mighty money tree I could grow by saving even a pitiful amount early on and watering it with time and compound interest!

### How compound interest works

Compound interest is the astonishing multiplier effect1 of interest earned on interest, over time.

It works like this for a saver who sticks away £1 and earns interest of 10%:

 Year Principal Interest @ 10% Total 1 £1 10p £1.10 2 £1.10 11p £1.21

In Year Two, you don’t add a bean to your savings, yet you still rack up more interest than the previous year (11p instead of 10p), because you also earned 10% interest on your interest.

Big wow. It doesn’t sound so life-changing – until you scale up the amounts and timescale involved.

Once that self-feeding, compound interest mechanism gathers momentum it creates a runaway money snowball that can transform your financial position.

But time is needed to generate that momentum. The sooner you start saving and investing, the more dramatically compound interest can work for you.

### Compound interest unleashed

Let’s consider two investors: Captain Sensible and Captain Blithe.

From the age of 25, Captain Sensible invests £2,000 per year in an ISA for 10 years until he is 35. At 35 he stops and never puts another penny into his fund again.

Captain Sensible then leaves his nest egg untouched to grow until he hits age 65. He earns an average annual return of 8%2 and when he looks at his account 30 years later, he has £314,870 to play with.

Captain Blithe, meanwhile, spends the lot between the ages of 25 to 35. Only when he hits 35 does he sober up and start tucking away £2,000 per year in his ISA. He keeps this up for the next 30 years until he reaches 65.

Captain Blithe earns an average annual return of 8%, too. He ends up with £244,691.

To recap:

• Captain Sensible has invested a total of £20,000.
• Captain Blithe has invested a total of £60,000.

Yet Captain Sensible’s pile is worth over 28% more than the late-starting Captain Blithe’s – even though Sensible only invested a third of the amount.

### Do it. Do it now!

Remember our ho-hum interest table above? Let’s dial up the years setting to 30 to see how she performs:

 Year Principal Interest @ 10% Total 1 £1 10p £1.10 30 £17.45 174p £19.19

After 30 years at 10%, you’re earning almost twice your entire initial investment as annual interest. That’s the power of compound interest.

Of course, the only place you can hope to get a 10% return these days is the stock market, and stocks go down as well as up. Real-life returns are more volatile, but the principle is rock solid.

Compound interest is an offer you’d be mad to refuse. Have a play with our compound interest calculator to see how much you can achieve.

When you’re young, time is on your side. Make the most of the once-in-a-lifetime opportunity by sticking some money away (anything is better than nothing) and let compound interest get to work securing your future.

You’ll be laughing later. (At me, as I snivel and regret my youthful folly).

The Accumulator

P.S. – Even if you’re not so young, now is still the best time to start.

1. At this point most compound interest articles like to quote Albert Einstein as saying: “The most powerful force in the universe is compound interest.” It seems more likely that this is an internet meme than an Einstein quote, but it lives on because it would be fantastic if true. []
2. That is, an 8% annual average return over the entire 40-year investment period. []

• 48 The Rhino February 3, 2016, 1:58 pm

@JohnG – and its worse than 100%, its 100%, i.e. all your capital *plus* leveraged up to the eyeballs with mortgage debt.

So although the massive gearing can go very right, on the flip-side it can go very wrong. Its definitely not sensible.

I think anyone slightly younger than me doesn’t truly believe housing assets can perform badly – they haven’t experienced it with skin in the game.

I think the least worst option is to buy the cheapest property you can bear at the earliest opportunity in your life. Then spend the rest of your effort diversifying away from that initial position. Its miserable I know, but least worst..

Thats if you want to do the normal stuff, i.e. get married, have kids etc.

If you don’t want that jazz then you can be more inventive, just read ERE for a few weeks and you’ll get the gist

• 49 JW February 3, 2016, 2:06 pm

On property, I have always taken the view that just by owning the house we live in (eventually- still paying off the mortgage) I have a substantial investment in residential property, and what is more I am indirectly invested in more as between us my OH and I are likely to inherit a share in several other houses (all paid for). So any spare cash I have is invested in other things, so ensuring that my asset base as a whole is diversified. Of course the growth in value in property has been much greater than in other assets, but I’d worry about being overly invested in one asset class particularly because that asset class is relatively illiquid: you can always sell some shares at a loss quickly if you need cash, but selling a house, even at a loss, can take time.

• 50 The Rhino February 3, 2016, 2:07 pm

@Planting Acorns – its 19k

• 51 JW February 3, 2016, 2:12 pm

@ the Rhino “anyone slightly younger than me doesn’t truly believe housing assets can perform badly ” nails it. I personally escaped having skin in that game (just) but bought my first flat from sellers in negative equity at a substantial discount to what they had paid a few years earlier, and watched friends suffer. Part of me still thinks the bubble will burst sometime

• 52 The Rhino February 3, 2016, 2:19 pm

but bear in mind if you had put it in a sipp for tarquin jnr he wouldn’t be able to access it for a further ~30years after that midway valuation

can you salary sacrifice into your childs sipp? I’m guessing probably not. Therefore a junior sipp doesn’t really make any sense, certainly not if your a HRT. The kid would only get 20% back on the 1st ~2800 per year.

Much better off putting it in your own SIPP/ISA then gifting it down the line when your still young enough to prob live a further 7 years. That way you keep your options open in case the lay of the land changes, i.e. detrimental government tinkering or your kids turn out to be a\$\$holes

• 53 The Investor February 3, 2016, 3:07 pm

I must admit to ongoing bemusement that compound interest is even debated as being an undeniably good thing or not. 🙂

Fine, I understand not everyone is in the position to save a lot when they’re young, and to keep up that saving when other responsibilities strike — although obviously I think most people are more in that position than their spending habits would imply — but the reality is continual saving, investing, and reinvesting has always been the surest route to the average person improving their wealth. Books like the Millionaire Next Door were an eye opener to me in this regard, many years ago.

As ever I am reluctant to talk personally in too much detail, but while this debate rages on and the markets slump 10-50% over the past year, my own net worth (which is all currently equities, some exotic pseudo-fixed interest, and cash) has multiplied about seven-fold over the past 12 or so years since I got passionate about investing, from an already fairly decent cash savings base. My average earnings over the period were not vast, and massively lumpy due to starting and then exiting at about breakeven a business, and then half living off savings more or less for a year or so afterwards. I’ve only ever paid a smidgeon of higher-rate tax all-in, so that gives you an indication that I’m not a mega-earner. And I only got serious about my SIPP in the past 2-3 years.

If I had saved every single penny I earned, GROSS, for the past 12 years, I still wouldn’t have the savings pot I have now — and obviously I didn’t, I lived in London over that period, a place not renowned for its cost of living benefits.

Barring Black Swans, if I never save another penny I project I’ll be a millionaire pensioner. If I keep saving I’ll be minted:

http://monevator.com/old-millionaires-next-door/

Compound interest is already my ally and friend, and I expect it to remain so.

The discussion is interesting in charting out the contours of what’s realistic and what isn’t, but I’d strongly urge any casual readers not to get too drawn into it if it means they start to doubt the benefits of saving regularly from a young age. You will almost certainly have a better result and life from it.

My snowball is a decent size relative to my income, and its rolling and growing and rolling. I’m in my early 40s.

The comments by @Andrew are sensible. Of course nobody (or at least not me) is saying that a young person should avoid particularly brilliant travel or other opportunities that require spending. But of all the young people I know, the “brilliant opportunities” spending is dwarfed by the “routine Med holidays to get blotted or weekly £100 evening out sessions or another new jacket” spending (and of course the savagely high cost of living/housing for most, and student loan repayments, and so on and depressingly on).

For other views on investing and compound interest from me, please see my earlier comments to ermine. 🙂

Finally, on property, one under-appreciated reason many people have done so well with property, aside from the cheap leverage, is that house prices have compounded for basically two decades, and they’ve regularly ‘saved’ to repay their debt.

http://monevator.com/10-why-houses-are-a-better-investment-than-shares/

Short version: If people invested the way they bought houses, they’d generally do a lot better.

• 54 The Rhino February 3, 2016, 3:30 pm

Another positive thing about compound interest is that it gets exponentially smaller over time if your growth is negative. Thats a nice asymmetry. Losses compound to smaller losses and so on if your going through a bad patch.

• 55 deadpiratelol February 3, 2016, 6:11 pm

I love your Blog which introduced me to John Boggle, Tim Hale and David Swensen and I have read books from all three to really understand the game.
Compound interest is fascinating indeed.. So I am the unlucky Captain Blithe, 33 years old and still getting started. I am one of those immigrants that everyone keeps complaining about.. 😀 So really, I couldn’t afford to save anything until I turned 28 years mainly because I was studying, supporting my old parents who I bet have never heard about pensions… haha However, in last 5 years I had consistently made enough money to be able to save 2000 GBP’s per month or more while living comfortably and still supporting my family. Guess what did I do with the extra money? Solve problems of my siblings/help them get mortgage..build houses.. etc and lots of waste on designer clothing and travelling and a big wedding. I didn’t invest in last 5 years and that is the lost time I can’t make up for in anyway. Luckily I have increased my income in all these years and am still able to save 2000 GBP’s a month after paying all my expenses. I now have a choice to invest this 2000 GBP’s a month either in the index funds or save it for the down-payment of the house. I already have 20000 GBPs saved for house deposit. Looking at the London house prices, there is a sharp increase in prices e.g. apartment I live in was bought by my landlord in December 2014 for 235,000 and similar apartment in my building just sold for 350,000 GBP’s last month. In this situation, would it be wise to invest in the stock market aggressively (2000 GBP’s a month) or save it for the house. Appreciate all the advice.

• 56 Planting Acorns February 3, 2016, 7:10 pm

@Rhino – where’s the 19k figure come from?

• 57 The Weasel February 3, 2016, 7:53 pm

Speaking of property not sure HMG is too supportive of it anymore given the latest tax changes. Heck even the torygraph is whining about it. I’m hearing again ridiculous stories about buyers offering something like 85K above asking price in the commuter belt. The last stage of the bubble? Who knows!

• 58 Planting Acorns February 3, 2016, 7:59 pm

@Weasel …tax changes only adverse on second properties… The govt. recently made the taxation of own homes even more attractive with it’s complicated set of IHT changes…

…As you would have to pay rent in the alternative, owning your own home seems to make sense in any circumstances (as long as you’re not forced to sell)

@Millie…nothing encourages hard saving like living somewhere cheap…this is purely anecdotal but I don’t think people fly the nest at 26/27…either they do it young or in their 40’s…

• 59 The Rhino February 3, 2016, 8:18 pm

@PA from the monevator compound interest calculator of course. After 30 years you would have 15-19k. After 60 you would have 50-90k. Based on your savings rate and range of expected returns.

• 60 Planting Acorns February 3, 2016, 8:34 pm

Ah @Rhino that’s 19k in ‘today’s’ money…ie
8pc – inflation – costs…but I was ‘obviously’ thinking of increasing the contributions in line with RPI as well ;0)

But you mention some great points that The Man might suddenly decide to take it to hand out in benefits. The ‘ever decreasing’ lifetime allowance puts me off adding a DC pension to my DB one.

• 61 Richard February 3, 2016, 8:40 pm

@the weasel

That is buy to let, agree they have it in their sights.

Primary residence on the other hand get hands out left right and centre (help to buy- which also artificially increases prices people will pay), tax relief (no capital gains on sale even if down sizing) and is significantly protected from IHT (isn’t it now £1m on primary). Plus leverage and if inflation gets going again, you watch that debt dwindle as the value sky rockets.

So fill your boots with as much primary residence as you can afford!

• 62 The Rhino February 3, 2016, 8:53 pm

@PA – but did we subtract 3% to give a nominal (inflation adjusted) return? Yes we did! Happy days

• 63 Planting Acorns February 3, 2016, 8:55 pm

@Richard @anyone considering how much to borrow to buy a home

…he might be right but when he says ‘…can afford’ bear in mind you need to be able to afford it when interest rates rise

• 64 The Rhino February 3, 2016, 9:00 pm

Sorry scratch that. Misread your post. You’re right that the savings rate didn’t increase with inflation. Which prob would be the case in a real world scenario

• 65 Planting Acorns February 3, 2016, 9:04 pm

@Rhino… But I meant £25 now and the equivalent of £25 next year (£25.75) etc…increasing contributions in line with inflation is crucial in any savings…

…I think Ermine raised a very good point…not only does £1 now buy more than £1 in the future, but because you earn more even adjusting for prices over time its hard to value a £ now. I remember my friends 21st birthday, when after a long boozy night we shared a can of Carlsberg export in a night club before getting the bus home…for his 30th we went to Rome… Why should the 21 year old me sub out the much richer 65 year old me?

I guess I’d rather have money to spunk in 30 years time and think I could have saved a bit less than sit over a one bar electric heater wishing I’d done more…

• 66 Richard February 3, 2016, 9:09 pm

I am being somewhat facetious, I do believe in a diversified portfolio.

But my parents were of the ‘buy as much as you can’. That was due to them experiencing high inflation – large debt payments shrunk away as wages jumped up. So hard for a few years and then easy with massive house to live in. Now it is more about the capital gain and the hand outs and the tax benefits (esp as pensions are slowly losing their tax draw)

• 67 Planting Acorns February 3, 2016, 9:40 pm

@Richard … Agreed.

My cousin is doing ‘London Help to Buy’…it is simply astonishing

• 68 Learner February 3, 2016, 11:21 pm

@deadpiratelol, it depends on your time horizon.. if you expect to need that money for a house deposit in less than 5 years then the sharemarket is a risky place to put it (particularly with current uncertainty). Better to put it somewhere with a lower fixed return but little risk, if any. I’m in a similar situation – have cash savings and can’t risk it in the market. I appreciate that prices are rising much faster than savings, but remember you only need a portion of that increase to cover the deposit. eg if you’re aiming for a 20% deposit and the price rises by £20k next year, but in that time you’ve saved another £10k then you’d be in a better position.

• 69 ermine February 4, 2016, 1:35 am

Seriously FFS. 10%. Dude, if I could return 10% p.a. I’d be laughing too. Compounding works. But you, personally, don’t get enough return and/or you don’t live long enough.

I hope that my estate will do well. I will instruct them to do n’owt for the first 100 years after my demise. After that, assuming the financial system survives, they will be able to boil oceans. Assuming, that is, oceans still exist to be boiled.

There’s no doubt compounding works. The tragedy is that it’s low rent. Your challenge is to live 200 years while spending bugger all for the first 100 🙂

• 70 ermine February 4, 2016, 1:55 am

@deadpiratelol It’s just my experience, but I was dumb enough to buy a house in 1989. The scars on my personal finances still show. I am debt-free, I retired early, but compared to my peers I live in a shitty semi (100% owned) as opposed to their fancy McMansions (50% equity, tops).

You, sir, are on the cusp of that choice. You have a hand of cards. Play those suckers well. You pays your money, you takes your choice.

I got up today, and asked myself how to go about bird surveying. My ex-colleagues got up today. To go to work…

Where did I go right? I overpaid, but paid down. Where did I go wrong? I boarded fewer jet aircraft, and those that I did, were paid for by work.

I should have rented. Buying that house was the single biggest financial mistake of my entire life. Chasing momentum in the dotcom bust was a mere trifle.

You can’t go wrong with housing, in the British mind. But who is retired early 😉 The buggers still ain’t making any more time on your three-score-years and ten… Beware the Kool-Aid. Property goes up and up for ever. Like all other assets. Until it goes down. BTDT

• 71 Learner February 4, 2016, 4:28 am

@ermine – Wait, so we can’t time the equity market but we can time the property market? It would be more useful to say buyers should go in with their eyes wide open and be prepared to stay put for 10 years or more should the worst happen. I suspect some people are now taking that view. If I could hypothetically buy a house now that would be worth no more than I paid for it after 10 years.. well that’s starting to look like not a bad deal, when rent is going up 5% every year (compounding!).

Reluctant as I am to carry on the property theme, with interest rates barely reaching the rate of inflation (ie negative in real terms) and the GFC’s half-arsed recovery already teetering, it’s extremely difficult to ignore it. Sorry TA/TI.

• 72 The Weasel February 4, 2016, 10:05 am

So what I gather from the ermine is it comes down to interest rate then, as opposed to save vs no save. And also the hopelessness in the future of capitalism. I have myself wondered whether the last 100 hundred years are *any* indication of the next 100 (axiomatic to any financial forecasting), but then again I can’t get myself to spend all my money on booze and hookers… The parties I’d be having, I tell you!!

• 73 Fremantle February 4, 2016, 10:30 am

I don’t understand the angst about compounding, either the over enthusiastic support for it, or the realists objection to highlighting the benefits of compounding. Compounding is one of the arguments in favour of long term investing and reinvesting of dividends. It gives a real and quantifiable boost to your investment returns, but as importantly, provides a defence against inflation. It even helps smooth out volatility over the long term through pound cost averaging for reinvested income.

Compounding is simply a fact of life for buy hold long term investing.

• 74 The Investor February 4, 2016, 10:40 am

@The Weasel @Ermine — I don’t know what more to say. I’m in my early 40s and I estimate I have roughly twice the six-figure sum I’d have without compound interest. Obviously (because I believe in compound interest) I expect it to snowball massively by 60, Inshallah.

Admittedly I’m an active investor who has seen better/lucky results, but I’m not Warren Buffett. And these have hardly been bull market conditions.

Ermine, I’m sorry you didn’t save when you were young. Your anecdote isn’t fact. Poor returns from the stock market for a decade or two doesn’t mean historical returns — and the logic behind those returns — gets thrown into the dustbin, it means it was one or two of those decades.

Also, all this wayward thinking when it comes to interest rates and inflation.

You can’t say “hey, I’ll need a fortune in my retirement due to inflation because Monster Munch used to cost 2p when I were a lad and now they cost 50p” in the same breath as “Interest rates are near-zero so there’s no return from compound interest”.

If interest rates stay near-zero for 20 years, Monster Munch will probably still cost about the same in 20 years. True, in a deflationary world compound interest isn’t going to help you, but that’s very different from arguing it wasn’t a massive leg-up for the past 100 years.

I’m happy with *us* having the debate, even if some of us are wrong IMHO. 🙂 My concern is that somebody fairly young Googles compound interest, comes to this page, reads certain of these comments, and so she doesn’t save until she’s 50.

What an absolute car-crash of a mistake from terrible advice that would be.

If the argument is “save more than you think rather than relying on potentially over-sexed return rates” then fine, we’re all a little wiser.

But enough of this: “But you, personally, don’t get enough return and/or you don’t live long enough.”

That is just not true, unless you take the advice of some and don’t start saving until you’ve only 20 years left on the clock.

• 75 Topman February 4, 2016, 1:19 pm

@all

FWIW and having started my adult life with nothing and never having inherited anything, I bought my first house, a modern semi-detached, with a mortgage in 1973 for £10,100 – I literally didn’t have that last £100 so I went into a high street bookmakers, put the contents of my wallet, £10, on a four horse win accumulator at Kempton (although knowing next to nothing about racing) and came out with £100+.

My current large detached house, in the beautiful south west, is conservatively worth £550,000, and I have the c.£100,000 proceeds from the sale of my business (8 years of 24/7 365 b*lls aching hard work) safely and sensibly invested.

I “saved” assiduously via the repayments on the various mortgages along the way, and by virtue of forsaking a good salary for the “joys” of starting and running a business which earned me no more than a paltry income but which had an attractive goodwill value when I sold it and retired.

So by virtue of my “saving”, my £10,100 became £650,000, compared with the £11.90 2016 value of £1 in 1973 per (http://inflation.stephenmorley.org/).

Hit my estate with heavier IHT or whatever? No thank you!!!!!

• 76 Luke February 4, 2016, 11:13 pm

“When you’re young, time is on your side. Make the most of the once-in-a-lifetime opportunity by sticking some money away”

As a 23 year old I’ve been following this advice since discovering Monevator back in 2012, even if you think young people don’t read your site. Just remember at least one does :).

Thanks to The Investor and The Accumulator for the great posts !!

• 77 The Investor February 5, 2016, 11:45 am

@Luke — Great to hear. (Please report back on your results at 60! 🙂 )

• 78 Survivor February 5, 2016, 4:11 pm

Maybe those who reckon CI is over-rated are just thinking too narrowly……

If your diversified investment portfolio is increasing by 10% a year, [like TEA, so not unproven] in an almost zero-inflation environment like we’ve had now for years, CI will give your survival fund a significant boost.

Even if over your investment lifetime, CI only contributed a 3 – 5% total boost to your wealth, would anyone turn that down? Almost everyone unknowingly hands that over to their closet-tracker, pension-provider annually anyway ….. & they seem quite happy with that, so it can’t be so bad.

• 79 The Rhino February 5, 2016, 8:20 pm

@Survivor – TEAs track record is remarkable. I wonder how TI compares? I would be interested to know what % APR figure TI used for his CI forecast. Double digits?

• 80 Ash February 6, 2016, 8:53 am

Lots of talk on here about property, as one would expect. My view is this: Commercial property can yield 10%+ at the moment, with longer Leases. A property purchased with 10% yield has very limited downside on capital, yet spits cash out each month, which can be reinvested in liquid investments immediately (eg. stocks). Ignore all advice to leverage with minimal deposit and buy instead using only cash – you will sleep better at night. The only downside is you are not compounding the initial capital but instead have fixed income which can be used for other things, although the rent can be increased. Reinvesting share dividends is great but not if the principal investment drops 50%…

• 81 Survivor February 6, 2016, 6:54 pm

@ The Rhino – I don’t know about TI’s score for this year, but in my portfolio, I got 3 areas that lit up …..just into the double figures by the end of the year – shares, property & P2P. So I know it’s possible, it’s consistency that matters though, year on year …..& that I don’t have enough of a record to go on yet, so am unable to preach.

If I had the guts to increase the percentages they make of the total, I would definitely do a lot better overall – you have to go with what your temperment can cope with however.

Over at the Brave New Life blog, although it’s American, it’ll have relevance for the UK & that guy tracks his experiment with the 2 main P2P platforms over there. What he gets rings true for what I have seen for myself – I have slowly worked P2P into my investments for nearly 3 years now, but am still cautious about how that’ll cope with a downturn in the real economy ….. so far it doesn’t seem affected by the recent stockmarket gyrations, but a cyclical downturn should be different.

• 82 IanH February 9, 2016, 5:27 pm

I sometimes wonder if Accumulator just wants to rattle Ermine’s cage now an again and knows just how to raise him from his slumbers. ..

Both ways of looking at compound interest have merit, and what seems to me to distinguish them is the time perspective. One can only save aggressively for so long, and eventually things will change; interest will compound ad infinitum if one leaves a fund alone – even your death will not prevent further accummulation, unlike earning and saving. But earning and saving knocks spots of interest compounding over short time scales and is the only way to build up a relatively large fund for late starters, or late higher earners (same thing maybe). I stopped saving into my SIPP about a year before I retired to save more cash. I’ve been retired about 6 months now – to see see the relative effect of saving and compounding over a human-scaled period of a few years check out this graph of my fund value over this period (hope the link works for people)

As I hope is apparent, the slope of the accumulation line for me was mostly savings driven. The aim of a saver is to get the slope as steep as possible, and the corner in the graph as high up the axis as possible, before saving stops, for whatever reason. Interest compounding then extends to infinity to the right in a more or less random walk with hopefully a very slight underlying upward trend on the scale of decades (the effect of compounding) that will keep the fund above zero despite small, occasional withdrawings.

• 83 Stan February 9, 2016, 6:13 pm

I saw a couple of young people posting here and thought I’d answer in with my experiences as well. Just as a quick background I’m American and 27. I started saving with my first job at 14.

I find that young people fall into one of two camps either saving nothing or saving massive amounts. I’d say it’s about 3 to 1 in favor or saving nothing. In the office where I work however I’m saving an impossible (for Europeans with European tax rates) 78% of my pre-tax income and almost have a house paid off (I owe about \$8,000 on a \$142,000 house which from what it looks like here is also impossible in most of Western Europe – it’s also declined in value from when I bought it also seemingly an impossibility in Western Europe).

My office mate and a few former roommates are almost the same way. I tend to believe it’s clustered by profession as most of my friends outside of what we do are part of the 75ish% majority saving nothing.

I also believe savings rate tremendously trumps compound interest. It’s almost a double edged sword because the higher your savings rate the less money you have to make up (assuming an income based approach). Compound interest is great but you really need lots of seed money for it. When I started saving at 14 I didn’t make much money compared to now and it didn’t really do too much compounding in the last 13 years but since I started saving heavily after graduating university (in percentage my savings have been remarkably consistent) I’ve seen how wonderful it is. Even though mathematically 10% on one dollar is the same as 10% on \$100,000 there’s a world of difference between \$0.10 and \$10,000.00

I also disagree that it’s hard for young people to save. It’s quite simple really and you can still maintain a normal life. I manage to visit 2-4 new countries every year and not just cheap ones like Croatia but expensive ones like Norway or the UK as well. Then again I’m lucky because I enjoy low tax rates, no university debts, and a couple other advantages.