On today’s show Tyler is joined by Chuck Prudhomme to discuss the power of compounding. They review an example of investing early versus late and examine how Warren Buffett’s wealth has compounded just after the age 60. Tyler and Chuck discussed some savings and investing concepts from Morgan Housel’s book the “Psychology of Money”.
The chart below shows the investment growth for Early Emily and Late Larry as discussed by Chuck in the episode. The chart shows: Early Emily starts investing $5,000 a year at age 20 and stopping after 10 years at age 30 investing a total of $50,000. Late Larry starts investing $5,000 a year at age 35 and stopping after 25 years at age 60 investing a total of $125,000. Both earning the same return on investment of 8% per year. Early Emily’s balance at age 60 is just over $850k whereas Late Larry’s balance at age 60 is roughly half Emily's balance at 426k.
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