The Miracle of Compound Interest

Last week I illustrated the impact of delaying retirement savings. So now, have a look at the upside of getting started sooner rather than later.
Case Study:
Peter invests R1000 at the beginning of each year for 10 years running at a return of 10% per annum, then he stops contributing but leaves the funds accumulated so far in the investment to continue growing.

At the beginning of the following year ( Year 11 – on our time-line) Paul, Peter's twin brother starts investing R1000 at the beginning of each year at 10%. He does this for the next 30 years.

This means Peter has invested a total of R10 000 over 10 years & Paul has invested a total of R30 000 over 30 years.

Who has accumulated the most money in their investment?

Peter has R305 908

Paul has R180 943

The difference? Compound growth and time.

What is procrastinating costing you? Getting started is the most important part of investing.

Have an awesome week.

Procrastination's Pricetag (Something for you to read later)

Have a look at this shocking case study showing why you need to make sure you start doing something about providing for retirement today.

Imagine you are 25 years old and you earn R10 000 per month. You want to make sure that you retire at age 65 at the same standard of living you enjoy now - so you need the same income, just adjusted for inflation.

You intend to invest monthly and increase your investment contributions in line with your salary inflation increments. You have so many expenses, you wonder if it's sensible to delay investing until you are in a better financial position.

So you call me and I show you what you'll need to do to make up for lost time:

• At 25, you're earning R10 000, you have 40 years to save and you need to save R1853 per month (18% of earnings)
• At 35 you're earning R21 589, you have 30 years to save and you need to save R6644 per month (31% of earnings)
• At 45 you're earning R46 609, you have 20 years to save and you need to save R26 517 per month (57% of earnings)
• At 55 you're earning R100 626, you have 10 years to go and you need to save R139 608 per month (139% of earnings)...

...so you cancel your retirement and start taking lots of vitamins 'cos you're gonna need put in an extra few years of hard work.

Coming soon - the power of starting sooner rather than later.