Compounding & Time

What Is Compounding?

Compounding happens when your money earns a return — and then that return begins earning returns of its own. The U.S. SEC describes compounding as one of the most powerful forces in personal finance because growth accelerates as your balance becomes larger.

Compounding works best with:

• Time — the longer you stay invested, the more cycles of growth you experience
• Consistency — ongoing contributions increase how much interest can compound
• Reinvestment — letting your earnings stay invested instead of withdrawing them

A Simple Way to Understand It

Think of compounding like a snowball rolling down a hill. At first it’s small, but as it rolls, it picks up more snow — and the bigger it gets, the faster it grows.

The Federal Reserve reports that households who begin saving early — even modestly — accumulate significantly more wealth over time than those who start later, even if later savers contribute more each month.

The Time Advantage

Time amplifies compounding because growth builds on growth. Waiting even a few years to start can dramatically reduce your final amount.

“The most powerful force in the universe is compound interest.” — Often attributed to Albert Einstein

Whether you're saving for retirement, college planning, or long-term wealth, your timeline matters more than your starting dollar amount.

V & V Advisors: Our Approach to Compounding

We help families take advantage of compounding without complexity. Our guidance focuses on:

• Starting early — even small amounts make a difference
• Building automatic monthly contributions
• Choosing accounts that support long-term growth (401(k), IRA, Roth IRA, custodial accounts, etc.)
• Avoiding high fees that reduce compounding power
• Understanding risk levels appropriate for your time horizon

Compounding works best when paired with a consistent, long-term plan — exactly what we help families build.