A lot of folks start working and earning money when they are around 23 – 25 years old.
While they save a portion of their salary, they usually don’t know much about investing and growing it better, so these savings are usually left in their savings account where it does not grow much.
( At a 4% return from banks, the value of their money actually gets destroyed on account of inflation )
Life happens ( marriage, kids etc ) and the ball usually drops about savings for the future in their 30’s, by which time they have lost 10 years.
So how much can money grow over the years, and how much of a difference 10 years can make, you might be wondering ?
Let’s look at 2 different types of savers and how much they ended up with by investing Rs 5000 per month.
1.) Ankit – Started at age 35. Invested for 25 years
2.) Ashish – Started at age 25. Invested for 35 years
This is how their savings can potentially grow (assuming an annual return of 12.5%):
1.) Ankit‘s savings of 15 lakhs can grow to ~ Rs 94 lakhs
2.) Ashish’s savings of 21 lakhs can grow to ~ Rs 3.2 crores
That’s an astounding difference of almost Rs 2.25 crores
– and it primarily happens because Ashish get an additional 10 years to compound his money ( since he started early ) even though he invests only Rs 6 lakhs more than Ankit
Ankit started late so he got the benefit for only 25 years of compounding and hence the lower corpus.
Let’s say you want to create a retirement corpus of Rs 10 crores. ( 10 crores might look like a huge sum today, but 30 years later, it won’t be a LOT of money, again primarily due to inflation )
If you start at age of 25 and invest Rs 15,500 per month, you should be able retire at 60 with Rs 10 crores.
However, if you start at age 40, you will need to invest Rs 1 lakh per month to retire with Rs 10 crores. See Graph Below.
Now, not all 25 year olds can invest Rs 15,000 per month when they start their careers.
The answer to that is – You don’t have to 🙂
If you start at 25 with just Rs 5000 per month, and increase your investments by 10% every year as your income grows, you can have almost 9 crores by age 60.
As you can see, the earlier you start investing your savings, the higher the benefit. However, even if you are older and haven’t started, it’s not too late.
As they say-Its better late than never! – The most important action you need to take is to START- NOW >>