How Wealth Compounds — And So Does Disinvestment

Compound interest is the most powerful force in finance—unless you never get to use it. Learn how disinvestment reverses the magic and what we can do to change it

Nov 18, 2025

Compound interest is the financial equivalent of gravity: invisible yet enormously powerful.

It’s the process where interest builds not only on your principal but also on the interest that’s already been earned. Because each round of gains gets reinvested, growth accelerates over time — the longer the time horizon, the greater the momentum.

The rule of thumb is simple: the earlier you start, the bigger the payoff.

Imagine two friends who each invest $5,000 per year at a 7% return. One begins at 25 and stops at 35; the other waits until 35 and invests until 65. Even though the second friend invests three times as much, the first ends up with more money at retirement — because her contributions had decades to compound.
That’s the quiet power of time and consistency.

But Compounding Cuts Both Ways

What if you never get the chance to start?

When communities are systematically excluded from investment — through redlining, predatory lending, or lack of access to capital — disinvestment compounds too.

Without early access to homeownership, retirement plans, or business loans, there’s nothing to reinvest. The wealth gap widens not because people are “bad with money,” but because the starting capital and compounding opportunity were never there.

As of 2022, the average White family held six times the wealth of the average Black family.

The St. Louis Fed traces much of that gap to policies that stripped wealth from Black households while enabling White wealth to grow. Those lost decades of compounding represent trillions of dollars in forgone opportunity.

Flipping the Script

Compounding is neutral — it amplifies whatever it’s applied to.
If we direct capital toward historically underinvested communities, we can make compounding work for equity, not exclusion.

Here’s how:

Invest early and locally. Community investment trusts, cooperative businesses, and baby bonds build shared ownership and collective returns.
Stop extractive cycles. Reform undervaluation, predatory lending, and exploitative financial structures that drain wealth.
Educate for agency. Equip individuals with financial literacy so they can use compounding to build — not just survive.

The story of compounding isn’t just about dollars. It’s about time, access, and the opportunity to grow.

Let’s make sure that the powerful force of compounding works for everyone — not just a lucky few.

Call to Action

Start your compounding journey today.

Open a high-yield savings account, contribute to a retirement plan, or join a community investment trust.

Then share this post to help others harness the power of compounding — for good.

Join the conversation. Share this post with someone who needs to hear it, and connect with The Wealth Salons to learn how you can help build wealth in The Great 38. Let’s co-create a future where every community has the tools to thrive.

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