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Early Investments Pay Off Big!

September 29, 2015

Early Investments Pay Off

You’re 24, out of school, just starting out or just starting to advance in your career, and steadily paying back your student loans. Maybe you’re thinking about getting married, buying a house and starting a family. Perhaps you’d like to use your annual vacation time and travel; broaden your horizons. You’re young and full of energy, and you have a passion for adventure sports like skiing, or kite-boarding, or skydiving, or scuba diving. Life is full of possibilities, excitement and adventure. And you have discovered that not one of those dreams, plans or adventures comes without a price tag.

With all of life that is happening now, how can you possibly support your family, your pastimes and your wanderlust and still have anything left over to invest in your future? At this age, how can you even begin to envision what the future will hold 10 or 20 years from now or as you close in on retirement?

With the New Year fast approaching, some basic financial facts and calculations should make it possible for you to start saving now for retirement.

Compound Interest

This “investing 101” concept means that as interest is earned on money that you save, that interest becomes part of the principal, in turn earning interest. If you put away $10,000 today and earn 5% interest annually, in one year you would have earned $500 in interest. If you added nothing more to the account and withdrew nothing, in 10 years your initial $10,000 would have grown to approximately $16,500. The 5% interest annually on $10,000 for 10 years  amounts to $5,000, but monthly compound interest means your money earned an additional $1,500 (approximately) over the 10-year period. Who doesn’t want free money?


Take the miracle of compound interest and apply it to an ongoing retirement savings plan. If you start today at age 24 and retire at the age of 65, that gives you 41 years of compound interest to accumulate. Based on 5% Annual Percentage Yield, if you open the account with your initial $10,000 and then add just $200 each month, at the end of 41 years your grand total would exceed $400,000.

If you decide to wait until you are a little older and more established to start saving, attaining the same grand total becomes a bit more daunting. If you start at age 40, giving yourself 25 years to save for retirement, starting with the same $10,000 investment, based on 5% Annual Percentage Yield, you would need to contribute more than $650 per month (more than 3 times the monthly amount if you start now) to reach $400,000 by age 65.


No one knows what their future holds and life is full of unexpected twists and unplanned expenses. The earlier you start saving, the less stressful these sudden changes will be. There is truth in timeworn clichés – The early bird really does catch the worm, and if you count your pennies the dollars will take care of themselves. Or you can approach retirement like comedian Henny Youngman, who once joked, “I’ve got all the money I’ll ever need, if I die by four o’clock.”

Get started now with a savings account or a 401K or an IRA from your employer or favorite bank. You don’t need to give up your dreams or stop having fun and adventures now, but learn the art of not needing to have everything all the time. It’s amazing how much you can save by just cutting back on small things each month. As a bonus, watching your investment grow can also be a lot of fun. As those who’ve been there wisely say, you’ll be amazed how quickly 24 turns into 44. When it does, don’t you want to know your future is secure?