Did you know that money you invest can grow over time? It makes sense then that the more time you allow for your money to grow, the more money you will have. Let’s check the math with some examples of three individuals:
Early Ed – starts saving $100/month at age 20
Moderate Meghan – starts saving $100/month at age 30
Later Larry – starts saving $100/month at age 40
(Each of them earn the same annual return of 7% on their savings)
How much will each of them have when they reach full retirement age of 67?
The blue bars represent how much money they each invested out of their paychecks. The green bars represent how much that money grew by the time they reach age 67. Notice that Early Ed invested only $24,000 more than Late Larry did. But at age 67 he has $350,000 more than Later Larry.
But perhaps you’re thinking I’ll start investing when I’m older but I will invest more than $100/month. Once again let’s check the math with our three investors.
Early Ed – starts saving $100/month at age 20
Moderate Meghan – starts saving $205/month at age 30
Later Larry – starts saving $440/month at age 40
(Each of them earn the same annual return of 7% on their savings)
By waiting until age 30, Moderate Meghan has to invest $205/month or $35,880 more than Early Ed to get the same result. By waiting until age 40, Later Larry has to invest $440/month or $90,240 more than Early Ed to get the same result.
No matter what your age, try to start accumulating savings NOW. A little bit of savings now can grow into a bigger nest egg than a larger amount of savings later.