The cost of waiting can make a huge difference in your future. The earlier you save, the more you will have at the end. For this example, I will use these three twin brothers, Adam, Bill, and Chris, saving at an 8% interest.
- Adam - Married shortly after college and was not able to start saving money until he was 33 years old. He then saved $2,000 a year for the next 28 years.
- Bill - Started saving after college, but once he got married at 32, the cost of living increased and was not able to add any more into his investment after age of 33.
- Chris - Saved up any left over from his college. He tried to save more money after college, but because of his extensive outgoing personality, he could no longer save any more after the age of 28.
Guess who ends up with more money?
| |
Adam |
Bill |
Chris |
AGE |
RATE |
Saved Yearly |
Total |
Saved Yearly |
Total |
Saved Yearly |
Total |
25 |
8% |
$0 |
$0 |
$2,000 |
$2,160 |
$10,000 |
$10,800 |
26 |
8% |
$0 |
$0 |
$2,000 |
$4,493 |
$2,000 |
$13,824 |
27 |
8% |
$0 |
$0 |
$2,000 |
$7,012 |
$1,000 |
$16,010 |
28 |
8% |
$0 |
$0 |
$2,000 |
$9,733 |
$500 |
$17,831 |
29 |
8% |
$0 |
$0 |
$2,000 |
$12,672 |
$0 |
$19,257 |
30 |
8% |
$0 |
$0 |
$2,000 |
$15,846 |
$0 |
$20,798 |
31 |
8% |
$0 |
$0 |
$2,000 |
$19,273 |
$0 |
$22,462 |
32 |
8% |
$0 |
$0 |
$2,000 |
$22,975 |
$0 |
$24,258 |
33 |
8% |
$2,000 |
$2,160 |
$1,000 |
$25,893 |
$0 |
$26,199 |
34 |
8% |
$2,000 |
$4,493 |
$0 |
$27,965 |
$0 |
$28,295 |
35 |
8% |
$2,000 |
$7,012 |
$0 |
$30,202 |
$0 |
$30,559 |
36 |
8% |
$2,000 |
$9,733 |
$0 |
$32,618 |
$0 |
$33,003 |
37 |
8% |
$2,000 |
$12,672 |
$0 |
$35,227 |
$0 |
$35,644 |
38 |
8% |
$2,000 |
$15,846 |
$0 |
$38,045 |
$0 |
$38,495 |
39 |
8% |
$2,000 |
$19,273 |
$0 |
$41,089 |
$0 |
$41,575 |
40 |
8% |
$2,000 |
$22,975 |
$0 |
$44,376 |
$0 |
$44,901 |
41 |
8% |
$2,000 |
$26,973 |
$0 |
$47,926 |
$0 |
$48,493 |
42 |
8% |
$2,000 |
$31,291 |
$0 |
$51,760 |
$0 |
$52,372 |
43 |
8% |
$2,000 |
$35,954 |
$0 |
$55,901 |
$0 |
$56,562 |
44 |
8% |
$2,000 |
$40,991 |
$0 |
$60,373 |
$0 |
$61,087 |
45 |
8% |
$2,000 |
$46,430 |
$0 |
$65,203 |
$0 |
$65,974 |
46 |
8% |
$2,000 |
$52,304 |
$0 |
$70,420 |
$0 |
$71,252 |
47 |
8% |
$2,000 |
$58,649 |
$0 |
$76,053 |
$0 |
$76,952 |
48 |
8% |
$2,000 |
$65,500 |
$0 |
$82,137 |
$0 |
$83,108 |
49 |
8% |
$2,000 |
$72,900 |
$0 |
$88,708 |
$0 |
$89,757 |
50 |
8% |
$2,000 |
$80,893 |
$0 |
$95,805 |
$0 |
$96,937 |
51 |
8% |
$2,000 |
$89,524 |
$0 |
$103,469 |
$0 |
$104,692 |
52 |
8% |
$2,000 |
$98,846 |
$0 |
$111,747 |
$0 |
$113,068 |
53 |
8% |
$2,000 |
$108,914 |
$0 |
$120,687 |
$0 |
$122,113 |
54 |
8% |
$2,000 |
$119,787 |
$0 |
$130,342 |
$0 |
$131,882 |
55 |
8% |
$2,000 |
$131,530 |
$0 |
$140,769 |
$0 |
$142,433 |
56 |
8% |
$2,000 |
$144,212 |
$0 |
$152,031 |
$0 |
$153,827 |
57 |
8% |
$2,000 |
$157,909 |
$0 |
$164,193 |
$0 |
$166,134 |
58 |
8% |
$2,000 |
$172,702 |
$0 |
$177,328 |
$0 |
$179,424 |
59 |
8% |
$2,000 |
$188,678 |
$0 |
$191,515 |
$0 |
$193,778 |
60 |
8% |
$2,000 |
$205,932 |
$0 |
$206,836 |
$0 |
$209,281 |
| |
Total Saved |
Total $ Gained |
Total Saved |
Total $ Gained |
Total Saved |
Total $ Gained |
| |
$56,000 |
$205,932 |
$17,000 |
$206,836 |
$13,500 |
$209,281 |
As you can see, Adam had saved $56,000 total thoughout his 28 years, but had not yet reach as much as Chris had obtain at age 60. The reason is because Chris started earlier, hence started compounding his money earlier and faster. See at age 40, Chris and Bill already had twice as much money as Adam.
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