I. Money · Calculator

Investment calculator: why starting early wins

See how regular investing grows and compounds over time, what waiting costs you, and how much of the result inflation and fees quietly take.

How compounding works

When your investments earn a return, that return gets added to your balance. The next year, you earn a return on the bigger balance, including on last year’s growth. That’s compounding: growth on top of growth.

At first it barely shows. Most of your balance is just what you put in. But because each year’s growth is a percentage of an ever-larger amount, the curve bends upward over time. In the chart, watch the growth band get thicker as the years go on. After enough years, growth adds more each year than your own contributions do.

Why starting early matters so much

Time is the biggest input to compounding, bigger than the amount you invest. Money invested in your twenties has decades longer to compound than money invested in your thirties.

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That’s why “start small, start now” beats “start big, start later.” Even an amount that feels too small to matter gets decades to grow.

Inflation: the hidden tax

Inflation is the rise in prices over time. It doesn’t take money out of your account. It makes each dollar buy less. That’s why it’s called a hidden tax: your balance looks the same or bigger, but it quietly loses buying power every year.

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• Cash isn’t safe from it. Money in an account paying less than inflation loses buying power every year, even though the balance never goes down.
• Think in today’s money. A big number decades from now sounds impressive, but what matters is what it will buy. The dashed line in the chart shows that.
• Investing is one way to keep up. To grow your buying power, your money has to earn more than inflation after fees.

Fees: the other quiet drag

Investment fees are usually shown as a small yearly percentage, such as 0.5% or 1%. That sounds tiny, but it comes out of your balance every year, so it compounds against you, the same way returns compound for you. Try changing the fee above from 0.1% to 1% and watch the result.

Low-cost index funds often charge a small fraction of a percent. Before you invest in anything, find its expense ratio and any account fees.

What this calculator assumes

• The same return every year. Real returns go up and down, sometimes sharply, and can be negative for years at a time.
• Contributions are added at the end of each month, and returns compound monthly.
• Fees are subtracted from the yearly return.
• No taxes. Depending on the account type (for example a 401(k), an IRA or a regular brokerage account), you may owe tax on contributions, growth or withdrawals.
• The same contribution every month. In real life, you might increase it as your income grows.

Do this today

• Put in your real numbers above, including a return lower than you hope for.
• If your employer offers a retirement plan match, check that you’re getting all of it.
• Look up the fees (expense ratio) on anything you already invest in.
• Set up an automatic monthly transfer, even a small one, so investing happens without a decision each month.

Sources

• Investor.gov (SEC): Compound interest calculator
• Investor.gov (SEC): What is compound interest?
• Investor.gov (SEC): The Rule of 72
• Investor.gov (SEC): Understanding fees
• US Bureau of Labor Statistics: Consumer Price Index (inflation data)

This calculator is for education, not financial advice. It uses a fixed return, but real investments rise and fall, and you can lose money. Past returns don’t guarantee future ones. For decisions about your own money, consider talking to a qualified, fee-only financial adviser.