What compound interest actually does
Simple interest pays you on the principal only. Compound interest pays you on the principal plus all the interest already earned. The math is exponential, not linear. The first decade looks slow. The fourth decade looks unreal. This is why starting at 25 is worth dramatically more than starting at 35, even if the 35-year-old invests more per month. Canadian registered accounts (TFSA, RRSP, FHSA) compound tax-free or tax-deferred, which makes the curve even steeper.
Contribute $500 a month into a globally diversified equity ETF in your TFSA at 8% from age 25 to 60. You invest $210,000 of your own money. The TFSA ends near $1.15 million, fully tax-free. Start at 35 instead and the same $500 a month ends near $475,000. The ten-year head start was worth roughly $675,000, on $60,000 of extra contribution.
Waiting to invest until you have a ‘real salary’. The variable that matters most is not the dollar amount, it is the number of years. $100 a month started today beats $1,000 a month started in eight years, in almost every Canadian retirement projection.
A 60-second lesson on this, with a worked drill, lives inside the Finlo app. Free, forever, on the basics.