The question
"I can only put away $100 a month. Is that even worth it?"
The idea
- Money you invest earns a return. Next year, that return earns a return too. This is compounding: growth on top of growth (lesson 4). It starts slow and speeds up, because each year it works on a bigger pile.
- So time does most of the work. A small amount started early can end up larger than a bigger amount started late. The most powerful number here isn't the $100. It's the number of years.
Worked example
We'll use the same real long-run return as lesson 4: SPY, a fund holding the S&P 500's large US companies, grew 10.7% a year on average from Jan 29, 1993 to Nov 10, 2026, with dividends put back in. Real years jumped around: in the month to Nov 10, 2026 alone, SPY fell 3.7%. So everything below is hypothetical: what a steady 10.7% would do, not a forecast.
Step 1. Turn the yearly rate into a monthly one: about 0.85% a month, because 1.0085 multiplied by itself 12 times is about 1.107.
Step 2. Put in $100 at the end of each month:
- Month 1: $100
- Month 2: $100 × 1.0085 + $100 = $200.85
- Month 3: $200.85 × 1.0085 + $100 = $302.56
The growth is pennies. After a year you've put in $1,200 and the pile is about $1,258. Only $58 is growth.
Step 3. Keep going. Same $100 a month, same rate:
| Years | You put in | Pile at the end | Growth |
|---|---|---|---|
| 10 | $12,000 | about $20,700 | $8,700 |
| 20 | $24,000 | about $78,000 | $54,000 |
| 30 | $36,000 | about $236,400 | $200,400 |
Step 4. In the last 10 years (years 20 to 30) you put in only $12,000 more, yet the pile grew by about $158,300. Most of the ending money is growth, and most of that growth arrives late.
Step 5. Flip it around. Someone who starts 10 years later and saves for 20 years ends with about $78,000: a third of the 30-year result, from two-thirds of the deposits.
The common mistake
"It's too small to matter, so I'll start when I earn more." The table shows why waiting is expensive: the decade you skip is the one whose deposits get the most years to grow. The second mistake is treating 10.7% as a promise. It was one fund's average over almost 34 years, crashes included. Yours could be lower.
Check your understanding
Pick an answer to see why. Two of three right passes the lesson.
1. What is compounding?Answer: B. Earning returns on your earlier returns, not only on what you put in. growth earns its own growth, so the pile speeds up. Not A: deposits feed the pile; compounding is the growth on top of them.2. In the table, after 30 years of $100 a month, about how much of the $236,400 is growth?Answer: B. About $200,400. $236,400 − $36,000 deposited = about $200,400. Not A: $36,000 is what you put in.3. Jo saves $100 a month for 30 years. Lee saves $150 a month, but only for the last 20 of those years. At the same 10.7% a year, who ends with more?Answer: B. Jo, because Jo's early deposits get 10 extra years to grow. Lee's $150 for 20 years is 1.5 × $78,000, about $117,000, against Jo's $236,400. Not A: the bigger monthly amount doesn't make up for the lost decade.
Takeaways
- Time is the biggest factor. Starting early beats starting big.
- Most of a long-term pile is growth that arrives late, so the early years matter most.
- Any return you use is the past, dated. Check a fund's since-launch pace on ETFIQ as a guide, not a promise.