At an early age, Warren Buffett understood the power of compounding.
He soon realised as early as 11 years old, that becoming first in class is not going to make him very rich but compounding through asset acquisition will make him very rich.
Starting EARLY in your savings and investing is MOST IMPORTANT.
Assumptions:
Compounding at 7% per year.
Rule of 72
Money will double in 10 years.
Mr. EARLY saves and invests early.
At age of 20, he saves and invests 10,000.
Age 80, he will have compounded over 60 years.
Every 10 years his money doubles.
This is 6 doubling = 2^6 = 2^3 x 2^3 = 8 x 8 = 64
At age of 80, his money of 10,000 will have grown to 64 x 10,000 = 640,000.
Mr. LATE BY TEN YEARS saves and invests 10 years later than Mr. EARLY.
At age of 30, he saves and invests also 10,000.
Age 80, he will have compounded over 50 years.
Every 10 years his money doubles.
This is 5 doubling = 2^5 = 2^3 x 2^2 = 8 x 4 = 32
At age of 80, his money of 10,000 will have grown to 32 x 10,000 = 320,000.
By investing early by 10 years the same 10,000 will have grown an extra 320,000 for Mr. EARLY compared to Mr. LATE BY 10 years!
START SAVING, INVESTING AND COMPOUNDING EARLY.
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