As a teen, it is the best time for you to leverage compound interest! Compound interest is when you earn interest upon interest (or just growing your portfolio exponentially)! One way to gain compound interest over time is by investing in the stock market. Historically, the average return for the stock market is about ten percent. This would mean that if you invested ten dollars every month in an index fund, such as the S&P 500 (average 12% return), when you were 16, then you could have over $14,000 by the time you turn 40.
Compound interest can be calculated using the following formula:
A = P ( 1 + r / n ) ^ n * t
A = final amount
P = initial principal balance
r = interest rate
n = number of times interest applied per time period
t = number of time periods elapsed
Another option is to simply search up “Compound Interest Calculator” on Google and input your respective numbers from there to visualize how much compound interest would help you grow.
Simply, starting early will make it easier for you to grow your portfolio quicker and at a higher rate over time. Here at Bumper, we make it easy for you to start investing early and gaining compound interest by catering our platform specifically to teens like you! We encourage you to start today on your investing journey and look forward to seeing you grow!