Big Surprise – the sooner you start to save, the better.

A lot has been written about the importance of saving and the importance of ‘starting early’ to allow time for your investments to grow. For those numbers people out there, reading about ‘starting early’ isn’t a real motivation without understanding the specifics: by starting at a certain age how much money will accumulate vs the intended goal, and if saving are for freedom (aka retirement for some, but for generally speaking it’s when the saver can do things the way they want, how they want, and only when they want), how many years earlier they can be free by starting to save at a younger age. To that end, the following charts have been created using the financial calculator tool available on Wealthbar illustrating the growth of monthly contributions over various periods – 20, 30 & 40 years. All assume the starting balance is zero (hey, a person has to start somewhere!), average return is 6%, and contributions are $1,000 per month. If you haven’t started to save already, this just might motivate you:

1000 monthly 20 yr 6% wealthbar

At 20 years, the amount of growth itself is almost equal to the contributions made over the years.  This is pretty significant, given the starting amount is zero.

30 yr 1,000 monthly 6% wealthbar

Who wants to be a millionaire?? You do 🙂  Yes, this includes another 10 years of contributions – but – the end result of more than double in savings from the first chart is the beauty of having your money working for longer.  How important is this extra time? If you wanted to end up with about the same amount ($940k) but only have 20 years to save, you would have to roughly double your monthly contributions – to about $2100 per month.

40 yrs 1,000 per month 6% feature

Look at the growth curve steepen on this chart!  The extra 10 years makes a huge difference.  Yes, $120k of that is contributions, but the rest is good old fashioned money at work.  If you wanted to end up with that nice $1.8M in savings with just 20 years to do it, you’d have to increase your monthly contributions to $4,100 based on the same rates of return.

Savings, of any kind, require a degree of commitment and sacrifice.  That’s why it’s so important to understand the end game – what the goal is and specifically what is required to achieve it.  Take the time to run some numbers – there are a variety of websites that offer financial tools, or work with an investment consultant to map out a plan and select suitable investments.  Most importantly, just start to save. Yes, start.  You can always fine tune as you go along but if there’s one take away from looking at these charts, it’s that time IS money.  Like Nike says ‘just do it’!

The not so fine print: Please note the author is not a Registered Investment Advisor, Broker/Dealer, Financial Analyst, Financial Bank, Securities Broker or Financial Planner. The above information is provided for information purposes only, and is not intended to be and does not constitute financial advice or any other advice, is general in nature and not specific to you.  Rates of return used in projections are for illustration purposes only.  You are responsible for your own investment research and investment decisions.