You have probably heard of the time value of money in the context of compounding.  The real value and amazing thing about investing over time is that returns really can add up quite nicely.  For example, if you are 25 years old and invest \$10,000 in an S&P 500 index ETF that earns 8% per year you will end up with \$49,610 at the end of 20 years.  That is the amount you will have if you do not invest any additional money.  What does this mean exactly?  If another person starts investing at age 45, and invests in the same increments as you do from then until retirement, they will need to have \$49,610 to invest at the beginning to keep up with you.  The formula for calculated any terminal value for an investment, given a starting point, is as follows:  x = start(\$) * (1+ i)^t  where x is the terminal value, start(\$) is the amount of money to start with, i is the annual interest rate, and t is the amount of years.  As you can see from the equation, it is not linear.  This means that your money will grow to a certain amount after year 1 and then you get interest/capital gains on that year 1 amount.  The terminal value is not start(\$) * (1+i) * 2.  When you hear about the power of compounding, that is the normal way it is presented and will hold at all times.