“Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” – Albert Einstein
I love graphs, so here are a few graphs showing what investing early can do for you.
Start saving and investing $5,000 a year at age 18. If your investments grow 6% a year, your final portfolio will be $1,282,000 at age 65.
Each year’s contribution is shown separately.
Your first $5,000 would have grown to $77,330!
Start saving and investing $5,000 a year at age 30. If your investments grow 6% a year, your final portfolio will be $596,000 at age 65. Your first $5,000 would have grown to $38,430.
Your total contributions from age 18 to 65 would be $240,000.
Your total contributions from age 30 to 65 would be $180,000. The extra $60,000 contributed from age 18 to 30 makes a massive difference!
The earlier you start saving and investing, the more your money will grow. The best time to start saving for retirement is probably now! One of the best ways to save for retirement is to use tax-advantaged accounts. These include 401(k), individual retirement accounts, and many other accounts. If you are able to contribute to a Roth IRA, that is a great place to start. Take a look at benefits of a Roth IRA. The million dollars of growth shown above could be tax-free!
Here is a link for the spreadsheet I used for the graphs. You can make a copy and personalize it!
https://docs.google.com/spreadsheets/d/1vt9_5RYGdoh2jn8lL5k79d_WWBueC4mOx3KQan5pJm4/edit?usp=sharing