Compound Growth in Investing — slides
Financial Literacy Club
Investing · Lesson 7
Compound Growth in Investing
Reinvesting returns, and what fees and time do over decades.
12-minute lesson · learnwithflc.org
Compound Growth in Investing · 1 / 20
Financial Literacy Club
Investing · Lesson 7
Compound Growth in Investing
Reinvesting returns, and what fees and time do over decades.
12-minute lesson · learnwithflc.org
Today's goals
By the end of class, you'll be able to…
- Explain how reinvested returns compound
- Describe dollar-cost averaging
- Show why starting early matters so much
Warm-up
Would you rather invest $10,000 once at age 20, or $200 a month from age 30 to 40 ($24,000 in total)? Guess which is worth more at 65 at a hypothetical 7%.
Think, then write your answer.
The big idea
Compound Growth in Investing
Reinvesting returns, and what fees and time do over decades.
Investing · Lesson 7
You learned compound interest in Money Fundamentals. Investing works the same way: when returns are reinvested, future returns are earned on a bigger base.
Investing · Lesson 7
Many funds let you automatically reinvest dividends, buying more shares instead of paying you cash. Over decades, reinvested dividends have made up a meaningful part of stock market returns.
Vocabulary
Dollar-cost averaging
Investing a set amount on a regular schedule, like $50 every month, no matter what the market is doing. You buy more shares when prices are low and fewer when they're high, and you never have to guess the "right" time.
Investing · Lesson 7
The biggest lever is still time. Starting ten years earlier can matter more than investing twice as much later.
Investing · Lesson 7
Hypothetical returns
Examples here use a steady 7% a year to show how compounding works. Real returns are uneven, include negative years, and are never guaranteed.
See it
Starting at 16: about $506,922 from $58,800 contributed. Starting at 26: about $243,630 from $46,800 contributed. Starting at 36: about $112,617 from $34,800 contributed.
Start at 16 ($58,800 put in)
Start at 26 ($46,800 put in)
Start at 36 ($34,800 put in)
Real example
The ten-year head start
Three people invest $100 a month until age 65, at a hypothetical 7% a year.
- Starting at 16: about $506,922 (they put in $58,800).
- Starting at 26: about $243,630 (they put in $46,800).
- Starting at 36: about $112,617 (they put in $34,800).
The person who started at 16 put in only $12,000 more than the person who started at 26 — but ends with about $263,292 more. Those early dollars had the longest time to compound.
Try it together
Try it: your own head start
Try $100 a month for 49 years (starting at 16), then for 39 years (starting at 26).
Your numbers
Real returns vary year to year and can be negative.
Results
Hypothetical balance after 49 years
$506,922
Compounded monthly at a constant 7% a year
You contributed
$58,800
Hypothetical growth
$448,122
Growth share
88%
of the final balance
- Your contributions
- Hypothetical growth
Show year-by-year tableHide table
| Year | Contributed | Growth | Balance |
|---|---|---|---|
| 1 | $1,200 | $39 | $1,239 |
| 2 | $2,400 | $168 | $2,568 |
| 3 | $3,600 | $393 | $3,993 |
| 4 | $4,800 | $721 | $5,521 |
| 5 | $6,000 | $1,159 | $7,159 |
| 6 | $7,200 | $1,716 | $8,916 |
| 7 | $8,400 | $2,400 | $10,800 |
| 8 | $9,600 | $3,220 | $12,820 |
| 9 | $10,800 | $4,186 | $14,986 |
| 10 | $12,000 | $5,308 | $17,308 |
| 11 | $13,200 | $6,599 | $19,799 |
| 12 | $14,400 | $8,069 | $22,469 |
| 13 | $15,600 | $9,733 | $25,333 |
| 14 | $16,800 | $11,604 | $28,404 |
| 15 | $18,000 | $13,696 | $31,696 |
| 16 | $19,200 | $16,027 | $35,227 |
| 17 | $20,400 | $18,613 | $39,013 |
| 18 | $21,600 | $21,472 | $43,072 |
| 19 | $22,800 | $24,625 | $47,425 |
| 20 | $24,000 | $28,093 | $52,093 |
| 21 | $25,200 | $31,898 | $57,098 |
| 22 | $26,400 | $36,065 | $62,465 |
| 23 | $27,600 | $40,619 | $68,219 |
| 24 | $28,800 | $45,590 | $74,390 |
| 25 | $30,000 | $51,007 | $81,007 |
| 26 | $31,200 | $56,902 | $88,102 |
| 27 | $32,400 | $63,311 | $95,711 |
| 28 | $33,600 | $70,269 | $103,869 |
| 29 | $34,800 | $77,817 | $112,617 |
| 30 | $36,000 | $85,997 | $121,997 |
| 31 | $37,200 | $94,856 | $132,056 |
| 32 | $38,400 | $104,441 | $142,841 |
| 33 | $39,600 | $114,806 | $154,406 |
| 34 | $40,800 | $126,008 | $166,808 |
| 35 | $42,000 | $138,105 | $180,105 |
| 36 | $43,200 | $151,165 | $194,365 |
| 37 | $44,400 | $165,254 | $209,654 |
| 38 | $45,600 | $180,450 | $226,050 |
| 39 | $46,800 | $196,830 | $243,630 |
| 40 | $48,000 | $214,481 | $262,481 |
| 41 | $49,200 | $233,495 | $282,695 |
| 42 | $50,400 | $253,971 | $304,371 |
| 43 | $51,600 | $276,013 | $327,613 |
| 44 | $52,800 | $299,735 | $352,535 |
| 45 | $54,000 | $325,259 | $379,259 |
| 46 | $55,200 | $352,715 | $407,915 |
| 47 | $56,400 | $382,243 | $438,643 |
| 48 | $57,600 | $413,992 | $471,592 |
| 49 | $58,800 | $448,122 | $506,922 |
Educational calculator, not financial advice. Results are hypothetical estimates based on the numbers you enter.
Activity · pairs · 10 min
The Ten-Year Head Start
- Three investors, all at a hypothetical 7% until 65: A invests $100 a month from 15. B invests $100 a month from 25. C invests $200 a month from 35.
- Pairs predict the order, then use the compound growth calculator to check.
- Pairs calculate how much each person contributed and how much was growth.
Check for understanding · 1 of 3
What does reinvesting dividends do?
- AUses dividend payments to buy more shares, so future returns compound on a bigger base
- BGuarantees higher returns
- CAvoids all taxes
- DPays you cash every month
A. Uses dividend payments to buy more shares, so future returns compound on a bigger base
Reinvesting turns income into more ownership, which can produce more income — compounding.
Check for understanding · 2 of 3
You invest $75 on the 1st of every month, whether the market is up or down.
What's this strategy called?
- AMarket timing
- BDay trading
- CDollar-cost averaging
- DShort selling
C. Dollar-cost averaging
Dollar-cost averaging removes the guesswork of timing and buys more shares when prices are lower.
Check for understanding · 3 of 3
Starting to invest ten years earlier can matter more than contributing more money later.
- True
- False
True
Early dollars have the most time to compound. Time is often the biggest factor.
Remember
Key takeaways
- Reinvested returns compound.
- Dollar-cost averaging = invest the same amount on a schedule.
- Starting early is the most powerful move.
- Real returns are uneven and never guaranteed.
Discuss
Talk it over
- What's one thing you could cut back on to invest $25 a month?
- Why do you think people put off investing until later in life?
Exit ticket
What is dollar-cost averaging?
Answer on your exit ticket before you leave.
Nice work today.
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