Money saved early……has more time to grow.
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When you’re in your 20s or 30s, planning for retirement is often the last thing on your mind. Maybe
you’re more concerned about landing that first job after graduation, buying a condo, or paying for your
toddler’s daycare. Who has enough disposable income to make investing worthwhile? You do! It’s
true! Many people mistakenly believe if they don’t have enough money to invest now, it’s better to
contribute more later. Yet one of the best ways to build wealth for the future is to invest now – even if
it’s only $50 per transaction. Not only is this easier on your budget, it helps decrease the impact of
market fluctuation in fund prices.
Starting at age 25, Sarah invests $100 every month for 30 years – a sum she barely notices. Sam
however, waits until he’s 35 before he begins investing his $100 per month. Both Sarah’s and Sam’s
investments yield an 8% annual return, compounded monthly.
After 30 years, Sarah has saved $333,012 and Sam $150,030. Simply by starting 10 years sooner, her
investment is worth $333,012, while Sam comes away with only $150,030.
It’s the phenomenon of compounding, money that reinvests itself and grows over time. That means the
sooner you start making regular contributions to your RRSP, the more money you will have when you
retire.
