What is the benefit of compound interest

Millionaire Teacher Book

Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School by Andrew Hallam

One of my all the time favourite books on financial independence is Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School by Andrew Hallam. The author, a middle/high school teacher managed to become a self-made millionaire by the age of 36 and shares 9 rules of investing he followed that we all should have learned through school.

This is the book that really got me out of my seat because it was proof that an average guy like myself could save and invest with an average income and someday really retire by 40. I didn’t have to be a doctor or lawyer like what my parents wanted me to be to make this happen.

I would recommend this to anyone serious about retiring early. It’s better than any finance book I read in university and this should mean a lot coming from a person that spent all of university studying Accounting and Finance and with over 5 year years of work experience at banks and investment brokerages. It’s written in a way that anyone without a finance background would understand.

One of my favourite examples that he used in his book to illustrate how we can all reach our investment goals faster is the concept of compounding returns. Compounding returns is the concept of repeatedly earning interest on top of interest, and interest on top of that interest. Over time, this can literally translate to millions of dollars. Here’s the example Andrew used in his book that shows how a one time investment of $100 can eventually translate to over $1 million:

If $100 attracts 10 percent interest in one year, then we know

that it gained $10, turning $100 into $110.

You would start the second year with $110, and if it increases

10 percent, it would gain $11, turning $110 into $121.

You will go into the third year with $121 in your pocket, and

if it increases 10 percent, it would gain $12.10, turning $121 into


It isn’t long before a snowball effect takes place. Have a look at

what $100 invested at 10 percent annually can do.

$100 at 10 percent compounding interest a year turns into—

$161.05 after 5 years

$259.37 after 10 years

$417.72 after 15 years

$672.74 after 20 years

$1,744.94 after 30 years

$4,525.92 after 40 years

$11,739.08 after 50 years

$78,974.69 after 70 years

$204,840.02 after 80 years

$1,378,061.23 after 100 years

I remember reading this when I was 20 years old, and couldn’t believe what I was reading. Out of curiosity, I wanted to know what Amanda and I would have to save to reach a million dollar investment portfolio by 40.

I began crunching some numbers with an investment calculator and we found that we would need to save $2,000 a month for the next 20 years assuming we earned annual returns of 8%.

Saving $2,000 a month really seemed like a lot to ask for when we were 20. At the time, we were still both in university, carrying student loans, and working part time jobs so this seemed like something that would be out of reach. After all, we were also laser focus on trying to become homeowners before 25 that we really didn’t think we could be saving for retirement and being homeowners at the same time.

We’re both 27 now and looking back, we could never imagine being able to afford a house in Toronto and still manage to be on track to retire by 40 with a million dollar investment portfolio.

To find out what we’re specifically doing, stay tuned for our next blog post!

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