We have all been told from an early age that we need to start investing while we are young. If you want to have a comfortable retirement, it is important to begin investing your money early on. There are some benefits which are on your side if you start early.
This being the power of time and compound interest. When we invest early in our lives, the amount keeps growing and when it becomes a big chunk, the growth in amount every year is a lot more, compared to initial years. Let’s look to the following example to show why you need to kick off your investment now!
We have Dan who started investing at age 15, when he got his first job, and puts the same amount, being $5,000, into shares each year until he turned 25 and then stops. He reinvests his dividends during those 10 years. Along the way he is earning an average 10%.
His best mate Tom doesn’t start investing until he gets a real job at age 25. He invests the same amount of money, being $5,000, into shares EVERY YEAR, and doesn’t stop until he retires at 60.
From the table below, it can be seen that even though Dan only invested less than one-third of the amount that Tom did, Dan has ended up with more money at retirement than Tom.
| Age | Dan’s
Investment |
Dan’s
Value |
Tom’s
Investment |
Tom’s
Value |
| 15 | $5,000 | $5,500 | ||
| 16 | $5,000 | $11,550 | ||
| 17 | $5,000 | $18,205 | ||
| 18 | $5,000 | $25,526 | ||
| 19 | $5,000 | $33,578 | ||
| 20 | $5,000 | $42,436 | ||
| 21 | $5,000 | $52,179 | ||
| 22 | $5,000 | $62,897 | ||
| 23 | $5,000 | $74,687 | ||
| 24 | $5,000 | $87,656 | ||
| 25 | $96,421 | $5,000 | $5,500 | |
| 26 | $106,064 | $5,000 | $11,550 | |
| 27 | $116,670 | $5,000 | $18,205 | |
| 28 | $128,337 | $5,000 | $25,526 | |
| 29 | $141,171 | $5,000 | $33,578 | |
| 30 | $155,288 | $5,000 | $42,436 | |
| 31 | $170,816 | $5,000 | $52,179 | |
| 32 | $187,898 | $5,000 | $62,897 | |
| 33 | $206,688 | $5,000 | $74,687 | |
| 34 | $227,357 | $5,000 | $87,656 | |
| 35 | $250,092 | $5,000 | $101,921 | |
| 36 | $275,102 | $5,000 | $117,614 | |
| 37 | $302,612 | $5,000 | $134,875 | |
| 38 | $332,873 | $5,000 | $153,862 | |
| 39 | $366,160 | $5,000 | $174,749 | |
| 40 | $402,776 | $5,000 | $197,724 | |
| 41 | $443,054 | $5,000 | $222,996 | |
| 42 | $487,359 | $5,000 | $250,795 | |
| 43 | $536,095 | $5,000 | $281,375 | |
| 44 | $589,705 | $5,000 | $315,012 | |
| 45 | $648,675 | $5,000 | $352,014 | |
| 46 | $713,543 | $5,000 | $392,715 | |
| 47 | $784,897 | $5,000 | $437,487 | |
| 48 | $863,387 | $5,000 | $486,735 | |
| 49 | $949,725 | $5,000 | $540,909 | |
| 50 | $1,044,698 | $5,000 | $600,500 | |
| 51 | $1,149,167 | $5,000 | $666,050 | |
| 52 | $1,264,084 | $5,000 | $738,155 | |
| 53 | $1,390,493 | $5,000 | $817,470 | |
| 54 | $1,529,542 | $5,000 | $904,717 | |
| 55 | $1,682,496 | $5,000 | $1,000,689 | |
| 56 | $1,850,746 | $5,000 | $1,106,258 | |
| 57 | $2,035,820 | $5,000 | $1,222,383 | |
| 58 | $2,239,402 | $5,000 | $1,350,122 | |
| 59 | $2,463,343 | $5,000 | $1,490,634 | |
| 60 | $2,709,677 | $5,000 | $1,645,197 | |
| Total Investment | Dan $50,000 | Tom $180,000 | ||
| Retirement Value | Dan $2,709,677 | Tom $1,645,197 |
So, if you’re young and questioning the value of starting investing early (hopefully upon reading this, and if you’re not already doing so, you’ll start investing today!), if you’re the parent of a young adult just entering the workforce, or if you’re trying to teach your teenagers some financial tips, please share this article!
