Time is our most powerful tool. Presented by brighthousefin
It may sound premature to squirrel away money for retirement in your 20s — hey, it'saway — but a few years could make a difference of tens of thousands of dollars, or more, thanks to compound interest.that rewards savers and investors, particularly those who act early. It's the snowball effect: As you roll a snowball down a hill, it gathers more snow. Not only does the original snowball grow in size, so does each additional pack.
Consider the following example and the chart below. Chris and Jennifer both invest $100 a month at a 5% annual compound rate of return. Chris begins investing at age 25, putting away $100 every month until 65 and Jennifer begins saving $100 a month at age 35. An extra ten years of saving means that Chris has about $162,000 in his bank account, while Jennifer has $89,000 by the time she is 65. Chris' balance is nearly double Jennifer's, and he only contributed $12,000 more of his own money.Now, if Chris and Jennifer incrementally increase their monthly contribution as they grow older — perhaps bumping up their savings rate by a small percentage with every pay raise — they'll wind up with even more money in that account at retirement.
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