Scientists have studied what truly drives happiness, and one key finding is that it’s closely tied to having options. Research shows that people are much happier when they have the freedom to make their own decisions, without feeling pressured by others. We tend to feel more satisfied when our choices are genuinely our own, rather than being influenced by external forces. Think back to a time when someone told you to do something you were already planning to do. Even though you might have intended to take that action, just being told to do it often made you resist. This highlights a deep human need for control over our decisions. Money plays a crucial role in creating that control and freedom—giving you the ability to choose how you spend your time, the opportunities you pursue, and ultimately, how you shape your life.
Yet, nearly 60% of Americans, even those earning over six figures, live paycheck to paycheck, struggling with expenses due to low savings rates and poor financial habits. The real issue isn’t just a lack of savings; it’s a failure to understand the true cost of not investing. People often fear the risks of investing, but the far greater risk is missing out on the power of compounding altogether. If more people could see the wealth they’re leaving on the table, they’d be far more likely to take action. In future newsletters, we’ll explore the best ways to build wealth through investing, but today, we’re laying out the cold, hard numbers. This article will show you the price you’re paying by waiting too long—or never starting.
Start Early or Stay Average
When people think of “saving,” they often picture stacking cash in a bank. But just saving comes with risks—mainly, inflation eroding its value. Worse, relying on cash means missing out on compounding, which only works if you start early. The difference between starting at 18 versus 30 isn’t just a few years—it’s the difference between building wealth or playing catch-up. Starting early separates you from the 60% of people living paycheck to paycheck. And if there’s one thing you don’t want to be, it’s average. Let’s break down these risks so you can see what’s at stake.
How $40 a Week Grows: Cash vs. Investment
To give you a clear picture of what this looks like, I ran the numbers for an individual who saves $40 a week ($2,080 annually)—a relatively low amount, considering financial experts recommend saving at least 20% of your weekly paycheck. I compared two scenarios over 30 years: one where the savings are kept in cash, which loses value over time due to inflation (estimated at 2% annually), and the other where the same $40 a week is invested in a simple, low-maintenance ETF, like one you could easily manage on platforms like Robinhood, with an average return of 8% per year (below historical averages). The results are eye-opening—let’s dive in.
As shown in the chart, the orange line represents the investment scenario, where your $40-a-week contributions grow to $254,479.41 over 30 years. In contrast, the blue line illustrates the cash scenario, resulting in only $46,324.24. This stark difference highlights the power of investing and compounding returns over time.
The Impact of Starting Early: A 30-Year-Old’s Catch-Up Game
Let’s imagine two friends. One starts investing at 18, contributing $40 a week, while the other waits until 30 to begin. Realizing he’s behind, the second friend decides to invest more than double—$100 a week—to catch up. But even though he’s investing more, his friend has had a 12-year head start. The next charts will show how much each of them ends up with by age 50 and reveal just how powerful starting early really is.
The difference between starting early with a lower contribution is striking—by age 50, the person who invested $40 a week at 18 has nearly $45,000 more than the one who started at 30, even though they’re investing more each week. Keep in mind, that $40 a week is actually a very modest amount to save, and the gap only widens the more you invest and the earlier you start. The earlier you begin, the more your money works for you through compounding, and the larger the difference becomes over time.
The Bottom Line
Investing can feel risky at first, especially with all the uncertainties in the market. However, what people often fail to realize is that the real risk lies in doing the opposite—not investing at all. As we’ve seen in the charts, the longer you wait, the more money you’re leaving on the table. It’s not about avoiding risk; it’s about understanding which risks are worth taking. Now that you have your “why,” we’ll explore the “how” of investing in future newsletters, providing you with the tools to get started. Stay curious and keep seeking knowledge—it’s the best way to navigate your financial journey.
Bonus: Time Travel for Your Wallet
For a fun (and slightly soul-crushing) look at the power of investing, check out the link. Plug in different amounts and dates to see how much a $100 investment in the S&P 500 would be worth today. It’s like a time machine, showing you how much you could’ve had if you started earlier—no pressure, just a little regret!
Check the link out here: SNP Data Calculator