Why You Should Consider Saving and Investing Earlier than Later

When it comes to saving for retirement, the “time is money” cliché is golden. The earlier you can start saving and investing, the better.

You’ll have more time to take advantage of the power of compounding. That’s when your original investment generates earnings (in the form of dividends or capital gains). Those earnings are then reinvested and, in turn, generate more earnings.

Consider this example: Steve is 25 and wants to retire in 35 years, when he’s 60. If he starts saving now with an initial investment of $100 and makes weekly contributions of $50, he’ll have over $299,000 when he retires, assuming his account earns an average annual return of 6%.

If Steve waits until he’s 35 to start saving (all other factors being equal), he’ll have around $147,000 when he retires—over 50% less than if he’d started 10 years earlier.

Steve’s savings: What happens when he starts at age 25 versus age 35

Steve's savings graph

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