10.6What 1% really costs

Compounding, fees and the cost of waiting. Money that grows earns growth on its growth, so small differences in the rate, or in the year you start, turn into large differences decades later. A fee, inflation and a card balance compound too, against you. Turn the dials and watch a gap of one percent, or ten years, open up.

Runs in your browser · amounts are in no particular currency · settings are saved in the link, so you can share them

Note

This is general education about a mechanism, not financial advice. The numbers are illustrations: real returns are not steady, nobody knows future ones, and the model leaves out taxes, which differ from country to country. Before a real decision, get advice that fits your own situation.

1Read

Elroy Dimson, Paul Marsh and Mike Staunton keep return records for 35 markets back to 1900. In their 2026 yearbook, American shares grew 9.8% a year from 1900 to 2025, or 6.6% a year after inflation, which averaged 2.9%. Developed markets as a whole returned 8.5% a year in US dollars. That is a record of one century, not a promise about the next.

Long-run yearly returns, 1900 to 2025, from the UBS Global Investment Returns Yearbook 2026
1900 to 2025, a year	Before inflation	After inflation
US shares	9.8%	6.6%
US long-term bonds	4.6%	1.6%
US Treasury bills	3.4%	0.5%

Those are averages over 125 years. Along the way, the same yearbook notes, shares and bonds have several times lost more than 70% after inflation. Every dial below holds the rate perfectly steady, which no market does. That is what makes the mechanism visible, and it is the main way this page is simpler than life.

2Wait

Two people save the same amount every month until they are 65. One starts at 25. The other waits. Set the yearly return, which this model holds constant every year, and how long the second saver waits.

Yearly return, before fees: 7%

The second saver starts at: age 35

Each saves, every month: 500

Starts at 25
Starts at 35

Show as a table

Savings by age, in future money, for a saver who starts at 25 and one who starts at 35, at 7% a year
Age	Starts at 25	Starts at 35
25	0	0
30	35,598	0
35	85,526	0
40	155,552	35,598
45	253,768	85,526
50	391,521	155,552
55	584,726	253,768
60	855,707	391,521
65	1,235,771	584,726

Starts at 25, has at 65: 1,235,771
Starts at 35, has at 65: 584,726
Cost of waiting 10 years: 651,045
Extra paid in by the early saver: 60,000

Note

Now a third saver puts in the same 500 a month from 25 but stops at 35, just as the second saver starts, and never adds another deposit. They pay in 60,000 against the second saver's 180,000, and at 65 they have 651,045 against 584,726 (in future money).

At 7% a year, 10 early years beat 30 late ones. The early money had longer to earn returns on its returns, and that growth outran every deposit made later.

3Charge
A fund charges a yearly fee as a share of everything in it. Leave 10,000 to grow at the return you set in step 2, once with no fee and once with one. The hatched band is the money the fee took. In 2025 the average American index equity fund charged 0.05% a year and the average actively managed one 0.64%, weighted by the money in each.
Set the fee to
Yearly fee: 1%
Left to grow for: 30 years
- No fee
- 1% fee
- Taken by the fee
Hover or touch the chart to read a point.
Show as a table
10,000 over 30 years at 7%, in future money, with no fee and with a 1% fee
Years No fee 1% fee
0 10,000 10,000
5 14,026 13,382
10 19,672 17,908
15 27,590 23,966
20 38,697 32,071
25 54,274 42,919
30 76,123 57,435
No fee
76,123
With the fee
57,435
Taken by the fee
18,688
Share of the final balance
24.5%
On step 2's saver, who pays in monthly from 25 to 65, the same fee takes 22.8%: later deposits pay it for fewer years.
Note
A 1% fee sounds like it costs 1%. At a 7% return over 30 years it takes 24.5% of what the money would have grown to, about a quarter. The sum is short: the balance grows by 1.06 a year instead of 1.07, and (1.06 ÷ 1.07)³⁰ is 0.75.
The fee is charged on the whole balance every year, including the growth it has already shrunk, so it compounds against you exactly the way the return compounds for you. With your settings it takes 24.5%.
4Adjust
Prices rise too, so a sum 40 years away buys less than the same number today. Set a yearly inflation rate and switch the charts above between the money as it will be counted then and what it would buy today.
Yearly inflation: 2.5%
Show amounts
Starts at 25, at 65, future money
1,235,771
The same, in today's money
460,239
What 100 costs today, at 65
269
Return after inflation
4.4%
The return after inflation is (1 + return) ÷ (1 + inflation) − 1, a little under the plain difference.
5Repay
Compounding runs the other way on debt. Take a credit card balance, stop spending on the card, and pay only the minimum each month. In September 2026 the Reserve Bank of Australia's figure for a standard card rate was 21.24% a year. Australia's government money guide says the minimum is typically 2% or 2.5% of the balance, or a set amount (usually around 20), whichever is greater. Rules differ between cards and countries; check your own statement.
Balance owed: 5,000
Card rate, a year: 21%
Minimum repayment
Or pay a fixed amount, every month: 200
- Minimum only
- 200 a month
Hover or touch the chart to read a point.
Show as a table
Card balance owed over time, paying only the minimum and paying 200 a month
Years Minimum only 200 a month
0 5,000 5,000
5 3,100 0
10 1,922 0
15 1,191 0
20 734 0
25 0 0
First minimum payment
127
Minimum only, cleared in
25 years
Minimum only, interest
9,847
200 a month, cleared in
2 years and 10 months
200 a month, interest
1,633
Note
The minimum is a share of what you owe, so as the balance falls the payment falls with it, and most of each payment goes on interest. Paying only the minimum, 5,000 at 21% takes 25 years to clear and costs 9,847 in interest: 2.0 times what was borrowed. A fixed 200 a month clears it in 2 years and 10 months for 1,633.
6Estimate
A shortcut for all of the above: money growing at a steady rate doubles in about 72 ÷ the rate in percent years. At 8% that is 9 years, so 40 years holds about four and a half doublings. It works for debt and for prices too: at 3% inflation, prices double in about 24 years.
Rate: 8%
72 ÷ rate
9.0 years
Exact
9.0 years
Off by
0.1%
Exact: log 2 ÷ log (1 + rate). The rule stays within 3% of it from 2% to 12%, and drifts above about 20%.
7Go
The same arithmetic runs through habits, skills and knowledge. Read on.

10,000 over 30 years at 7%, in future money, with no fee and with a 1% fee
Years	No fee	1% fee
0	10,000	10,000
5	14,026	13,382
10	19,672	17,908
15	27,590	23,966
20	38,697	32,071
25	54,274	42,919
30	76,123	57,435

Card balance owed over time, paying only the minimum and paying 200 a month
Years	Minimum only	200 a month
0	5,000	5,000
5	3,100	0
10	1,922	0
15	1,191	0
20	734	0
25	0	0

10.6.1How the model works

Savings grow every month at the rate that compounds to the yearly return you set, and each deposit lands at the end of the month. A fee is taken out of the return, so a 7% return with a 1% fee grows the balance 6% a year. Today's money divides a future sum by (1 + inflation) for every year between now and then, with “now” being age 25.

The card charges its yearly rate divided by 12 on the balance each month. The minimum repayment is the chosen share of the balance after that interest, or 20, whichever is more, and never more than is owed. Nothing new goes on the card, and there are no late fees.

It is a toy in one important way: every rate is constant. Real returns jump around, and when they arrive matters to anyone adding or taking money out. Taxes, which depend on where you live, are left out entirely. Every number in the readouts is computed by the model from your dials; none is typed into the page.

10.6What 1% really costs

10.6.1How the model works

10.6.2Sources