Why starting to invest at 16 beats starting at 26

The $100 Thought Experiment That Changes Everything

You drop $100 into a low‑cost S&P 500 index fund the summer you get your driver’s license. Your older cousin, busy with freshman year of college, waits and puts in the same $100 ten years later. Fast‑forward to age 66:

You (Invest at 16, 50 years compounding): $11,739
Cousin (Invest at 26, 40 years compounding): $4,526

That single decision—just timing, no extra cash—more than doubles your return.

1. The Secret Sauce: Exponential Math

Compounding means each year’s gains earn their own gains. Early dollars grab extra “snowball” years, so even tiny amounts get turbo‑charged.

Rule of 72 hack: divide 72 by the annual return to see how fast money doubles.
At 10 %, $100 → $200 in ~7 years. Give it 50 years? It doubles seven times.

2. “But I’m Broke—I Can’t Invest Much”

Swap the one‑time $100 for $25/month (less than one DoorDash order):

• $25/mo from 16–26, then stop → ≈ $1.1 million by 66
• $25/mo from 26–66 → ≈ $630 k

Same total contributions, wildly different outcomes.

3. How to Get Started in 20 Minutes

1. Open a custodial brokerage (under 18) or a Roth IRA once you have W‑2 income.
2. Pick a broad‑market index ETF—it already owns 500+ companies.
3. Automate a small transfer the day your paycheck hits.
4. Reinvest dividends (most platforms do this automatically).

—you’re all set.

4. Try It Yourself

Play around with these scenarios in our interactive graph—see for yourself how small differences add up:

• Scenario A: Invest $50 at 16 vs. $50 at 26, hold until 66.
• Scenario B: Invest $100 at 18 vs. $100 at 28, hold until 60.
• Scenario C: Invest $25/mo from 15–25 vs. $25/mo from 25–35, hold until 70.

5. Common Speed‑Bumps (and How to Swerve)

• “I’ll wait until I make ‘real’ money.”
  Reality: Time > income. Even $5 / week now outgrows $50 / week later.
• “I need to pick hot stocks.”
  Reality: A plain S&P 500 ETF has beaten 88 % of active funds over 20 years.
• “Markets are risky—what if they crash?”
  Reality: Every bear market on record was followed by a new high; the index still averages ~10 % annually.

6. Hard Numbers: Real‑World Balances

• Fed’s 2022 Survey: Households 65–74 hold $609 k in retirement vs. $49 k for under 35s—a 12× gap driven by compounding.
• Vanguard 2023: Average balance for workers 25–34 is $30 k; for 55–64 it’s $207 k—7× larger with three extra decades of growth.

7. Research‑Backed Game Plan

• Auto‑enroll plans boost savings by 66 %.
  Action: Automate everything.
• Under‑25 workers save more when auto‑enrolled.
  Action: Start before 18 if possible.
• Average savings rate hit a record 11.7 % in 2023.
  Action: Aim for 10–15 % of every paycheck.