The age at which a person starts saving has a profound impact on the amount they can earn through compound interest. Starting earlier allows the invested money more time to grow because compound interest is calculated on both the initial principal and the accumulated interest over time. This effect means that even small contributions made early can grow substantially larger than larger contributions made later in life. For example, consider these scenarios investing $500 a month at an average 7% annual return:

• Starting at age 24 could grow to over $1.5 million by age 65.
• Starting at age 30 might grow to around $920,000 by age 65.
• Starting at age 40 might grow to about $380,000 by age 65.
• Starting at age 50 might only grow to about $160,000 by age 65.

This demonstrates how every year of delay significantly reduces the growth potential because there is less time for the interest to compound on itself. Even if someone invests more money later, they may end up with less total wealth compared to someone who started earlier with smaller contributions. The power of compound interest relies heavily on time, making an early start the most critical factor in wealth accumulation through saving or investing. In brief, the earlier an individual starts saving, the more they benefit from compound interest, leading to much greater earnings over time, while starting later greatly limits the potential growth of their investments.