John waits until he is 30 to begin investing. He invests $250 per month for 30 years. He is able to achieve a 7% compound annual return. Over the course of his investment career, John invests $90,000 of his own money ($3,000 per year for 30 years) and at 60 years old, he has accumulated $303,219.
Mary invests $250 per month for ten years starting, when she is 20 years old. At age 30 she stops contributing her $250 per month, but keeps her money invested. She is able to achieve a 7% compound annual return. Over the course of her investment career, Mary invests $30,000 of her own money ($3,000 per year for ten years) and at 60 years old, she has accumulated $333,610. Be more like Mary.
The earlier, the better!
John contributed three times as much of his own money for three times as long, but still didn’t accumulate as much as Mary by age 60. Since Mary started a decade earlier, she benefitted from compound interest that developed over 40 years, instead of 30 years for John. This additional ten years of compound interest were enough to overcome the additional money John contributed.
It’s not too late!
Even if you’re older than 20 or even 30, it’s never too late to get started saving and investing — or to ramp up what you’re already doing. Establishing a habit of saving every month is the most important determinant of success over time.
Want to learn more? Contact me today, (816) 607-9188 to schedule a no-cost consultation.
Subscribe to our newsletter to get the latest tips and advice.