Investing

What is compound growth?

Compound growth is what happens when the returns your money earns start earning returns of their own. It's the reason financial advice keeps repeating the same line: start now, even with a small amount.

How it actually works

Say your investments grow in value one year. The next year, you're not just earning a return on your original contribution — you're earning a return on that original amount plus everything it already grew by. Each year builds on a larger base than the year before, and the gap between "started early" and "started later" widens faster than most people expect.

Why time matters more than the amount

Someone who invests smaller amounts starting in their 20s will typically end up ahead of someone who invests larger amounts starting in their 30s or 40s, simply because the earlier money had more years to compound. Time in the market does work that's hard to make up for later, no matter how much you increase your contributions.

Where compound growth actually happens

It doesn't happen in a checking account. It happens in an account invested in the market — a brokerage account, an IRA, or a 401(k). Opening one is more approachable than it sounds: providers like Robinhood let you start with any amount you're comfortable with.