Why you should start
saving early.
Save early. By now you’ve probably heard that thousands of times. If you start now, you can be a millionaire in no time with the power of compound interest. Well, sort of. It’s not quite that easy, but the theory is right.
Who doesn’t want to be rich? If you start saving money right now, you have a better shot of reaching that goal. In fact, if you start saving at age 18, by saving around $2.56 per day or about $79 per month (assuming 10% savings rate), you could be a millionaire by the time you’re 65! Can you cut $2.56 a day? Maybe you can eliminate trips to the vending machine, that fancy coffee drink, or eating out once a day.
Time plays a huge factor in how your savings will grow. It’s also important to understand what kind of interest you’re earning. There are two types of interest used to calculate savings: Simple and Compound.
Simple interest means you’re just earning interest on the initial amount you save. That means if you save $100 now, and earn $10 per year in interest, you keep earning $10 every year you have the original $100 in savings. Check out the chart below.
Compound interest means you’ll be earning interest on top of interest. If you saved that same $100, you start earning interest now and every year you earn interest on the original $100 AND the interest you’ve already earned. That means you’re savings grows faster and really adds up. Instead of just earning $10 of interest, your interest goes up each time. Check out the chart below.
Here’s an example of how compound interest works versus simple interest. As you can see, the compounded interest grows much quicker than simple interest, which means your savings grows faster too!
So what does all that mean?
If you combine the benefits of compound interest with the benefits of saving early, you’ll be off to a great start.
Check out the example and chart below.
If you start saving $1,000 per year starting at age 16 (or about $2.74 per day) for the next and stop at age 26, that money will grow to over $131,000 by the time you’re 50. If you saved $1,000 every year until you were 50, you’d have over $215,000! But, if you wait ten years to start saving, and still save $1,000 per year, you’ll only have $84,000. That’s a difference of over $46,000! You can see how it all breaks down in the chart below.
As you can see from the example, saving early can really pay off in the long run. By saving just a few dollars a day, you can build your savings up significantly for later on in life.
A little work now will make life easier later on down the road. Wright-Patt can help you figure out a plan to save now so you can enjoy later.