Monday, December 18, 2006

3284 Don't wait to start saving

It will cost you a lot of money.

"David is 25 years old.
He begins saving $2,000 a year for ten years (until age 34) then stops. A total of $20,000 has been invested.

Katie, age 22, plans to wait until age 35 to start saving and will invest $2,000 a year until age 65 at a total investment of $62,000.

Who would you expect would have more money at 65?

If you guessed David, you were RIGHT!

David’s initial investment of $20,000 in stocks (at an average interest of 10%) would be worth $545,344 at age 65.

Katie’s initial investment of $62,000 ($2,000 X 31 years) in those same stocks would be worth $352,427 at age 65."

And if David hadn't stopped, but kept going until he was 65? He'd have $815,771. think of it. Just $2,000 a year. That's just a little more than a pack of cigarettes a day not bought and smoked.

Project Cash How time affects the value of money

3 comments:

Anonymous said...

Hi,

I was wondering what type of stocks you are talking about? Mutual funds? Seeing as though i am presently 25 years, your little blurb sparked my interest. I suppose your investment is not guaranteed, seeing as its possible you could lose all of the money, if the stocks went down in value.

Norma said...

Yes, they could and will; but over time, the 10% figure has held. That's why you invest when you're young. And no, I don't buy mutual funds. But follow the links. I just play an investment advisor on the internet.

Anonymous said...

You seriously always have something interesting on your blogs