In the recent article I read in Business Insider, they tackled about the difference between someone who starts saving at 25 vs. someone who starts at 35. A 10-year difference in saving horizon.
Based on the article, they consider two hypothetical savers, Emily and Dave. Emily puts $200 per month into a retirement account with an estimated 6% rate of return starting at 25. Dave starts saving $200 per month at 35, just 10 years after Emily.
Both continue to add $200 each month until they retire at 65. By the time they are 65, Emily has contributed $96,000, while Dave has contributed $72,000.
And I did not expect the results to be that significant! See the illustration below.
Emily started saving just 10 years earlier and put in only about 33% more money into her account.
When they retire at age 65, Emily has $402,492, and Dave has $203,118!
Again, what Emily did that matters? Just two things, 10 years earlier and saved more.
That is the power of compounding interest and the advantage of starting early.
Now I experimented it myself.
This is my scenario.
Mr. Invest Agad invested at the age of 20 at P24,000 a year or just P2,000 a month for 6 years.
On the other hand, Mr. Invest Tsaka Na also invested 24,000 a year or just P2,000 a month for 6 years but started only at age 27, which is 6 years behind Mr. Invest Agad.
After 6 years of investing, they stopped. (Assumption is at 12% annual investment return)
Again, the only difference is that Mr. Invest Agad started 6 years early.
See what happened to their investment below.
P10,283,493 million vs P5,209,938 million!
Almost doubled! Same invested amount! Only one difference. They started early.
Will you now invest?
Just imagine the returns you are losing when you defer investing!
I know that you have heard these investing theories from your friends and relatives and skeptical about it but I encourage you to just start.
When you start as early as possible, you are ahead of the pack.
Of course, you have to do your due diligence before investing, there are many scams out there. Research and study.
You do not need to be technical in investing.
Like what I am always emphasizing in this blog.
Success in investing is 80% Discipline/Action and 20% Knowledge/Technical.
Just start. Just Fire then Aim.
Will you now invest?
You want to start investing in stocks? We can guide you. Visit us at www.TrulyRichClub.ph
Laurent Dionisio, CPA, RFP
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