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The Power of Compounding

Imagine investing $2,500 when a child is five years old and another $2,500 when he is six years old and turning that $5,000 investment into more than $1 million by the time the child is ready to retire! (This growth is based on an average annual rate of return of 10%--a conservative estimate of the stock market's historical average annual rate of return.)

And you can make those results much more dramatic! Say you were to invest that $2,500 until he or she reaches 18 years of age.

Your total investment over the 14 year period would be $35,000. That investment could be expected to grow to over $6 million by the time the child retires! The chart below shows the results of compounding based on an average annual return of 10%. (Which is the growth rate--including dividends--of the market in general over the long term, according to Ibbotson Associates, the Chicago based research firm).

Also read Give Them a Head Start.

$2,500 invested

at ages five and six

Year Age Invested End of year
1 5 $2,500.00 $2,750.00
2 6 $2,500.00 $5,775.00
3 7 $6,352.50
4 8 $6,987.75
5 9 $7,686.53
6 10 $8,455.18
7 11 $9,300.70
8 12 $10,230.76
9 13 $11,253.84
10 14 $12,379.23
11 15 $13,617.15
12 16 $14,978.86
13 17 $16,476.75
14 18 $18,124.42
15 19 $19,936.87
16 20 $21,930.55
17 21 $24,123.61
18 22 $26,535.97
19 23 $29,189.57
20 24 $32,108.52
21 25 $35,319.37
22 26 $38,851.31
23 27 $42,736.44
24 28 $47,010.09
25 29 $51,711.10
26 30 $56,882.21
27 31 $62,570.43
28 32 $68,827.47
29 33 $75,710.22
30 34 $83,281.24
31 35 $91,609.36
32 36 $100,770.30
33 37 $110,847.33
34 38 $121,932.06
35 39 $134,125.27
36 40 $147,537.79
37 41 $162,291.57
38 42 $178,520.73
39 43 $196,372.80
40 44 $216,010.08
41 45 $237,611.09
42 46 $261,372.20
43 47 $287,509.42
44 48 $316,260.36
45 49 $347,886.40
46 50 $382,675.04
47 51 $420,942.54
48 52 $463,036.80
49 53 $509,340.48
50 54 $560,274.53
51 55 $616,301.98
52 56 $677,932.18
53 57 $745,725.39
54 58 $820,297.93
55 59 $902,327.73
56 60 $992,560.50
57 61 $1,091,816.55
58 62 $1,200,998.20
59 63 $1,321,098.02
60 64 $1,453,207.83
61 65 $1,598,528.61

$2,500 invested

from age five to age 18

Year Age Invested End of year
1 5 $2,500.00 $2,750.00
2 6 $2,500.00 $5,775.00
3 7 $2,500.00 $9,102.50
4 8 $2,500.00 $12,762.75
5 9 $2,500.00 $16,789.03
6 10 $2,500.00 $21,217.93
7 11 $2,500.00 $26,089.72
8 12 $2,500.00 $31,448.69
9 13 $2,500.00 $37,343.56
10 14 $2,500.00 $43,827.92
11 15 $2,500.00 $50,960.71
12 16 $2,500.00 $58,806.78
13 17 $2,500.00 $67,437.46
14 18 $2,500.00 $76,931.20
15 19 0 $84,624.32
16 20 0 $93,086.76
17 21 0 $102,395.43
18 22 0 $112,634.98
19 23 0 $123,898.47
20 24 0 $136,288.32
21 25 0 $149,917.15
22 26 0 $164,908.87
23 27 0 $181,399.76
24 28 0 $199,539.73
25 29 0 $219,493.70
26 30 0 $241,443.07
27 31 0 $265,587.38
28 32 0 $292,146.12
29 33 0 $321,360.73
30 34 0 $353,496.81
31 35 0 $388,846.49
32 36 0 $427,731.13
33 37 0 $470,504.25
34 38 0 $517,554.67
35 39 0 $569,310.14
36 40 0 $626,241.15
37 41 0 $688,865.27
38 42 0 $757,751.80
39 43 0 $833,526.98
40 44 0 $916,879.67
41 45 0 $1,008,567.64
42 46 0 $1,109,424.40
43 47 0 $1,220,366.85
44 48 0 $1,342,403.53
45 49 0 $1,476,643.88
46 50 0 $1,624,308.27
47 51 0 $1,786,739.10
48 52 0 $1,965,413.01
49 53 0 $2,161,954.31
50 54 0 $2,378,149.74
51 55 0 $2,615,964.71
52 56 0 $2,877,561.18
53 57 0 $3,165,317.30
54 58 0 $3,481,849.03
55 59 0 $3,830,033.94
56 60 0 $4,213,037.33
57 61 0 $4,634,341.06
58 62 0 $5,097,775.17
59 63 0 $5,607,552.69
60 64 0 $6,168,307.96
61 65 0 $6,785,138.75

Calculate your
future wealth

Anticipate Your Wealth

at retirement--based on

an average annual rate of return of 10% *

(The calculation is based on investing $2,500 annually until you are 65 years of age)

Change The Rate of Return


* Over the past 75 years, the average annual rate of return for the stock market as a whole has been 11%. Our calculations are based on a more conservative 10%.