Investing Young Makes a Huge Impact
To show how affective early investing is, we have an example of two participants:
Participant A starts to invest $2,000 per year starting at age 21 and stops at age 30. At age 60, the estimated value of Participant A’s portfolio is worth $367,000.
Participant B starts to invest $2,000 per year starting at age 31. By the time Participant B reaches 60 years of age, their estimated portfolio is worth $247,000.
This example explains the importance of time and compounding interest. Participant A only invested the annual contribution for 10 years, while Participant B started investing later and had to invest the same amount for 29 years! And after all of those contributions, Participant B still comes out with a lower value that Participant A!
Some helpful recommendations are:
Start contributing as soon as possible; even small amounts make a difference.
Over time, use raises as an excuse to increase your contributions.
Make a goal to max out your contributions over time.
Commit to lower debt and increase savings.