You’ve heard us say this a million times before, but our clients aren’t wealthy because of the amount of money they have, but because of the options their money gives them.  Well, in order to create options, you need time.  Time in the market, time saving dollars, time to accumulate different buckets of money and income streams.  Time is important because of the beautiful thing we call compounding and unfortunately, time is the one thing we can’t get back.

If I could give my younger self one piece of advice, it would be to start saving and investing sooner.  Compound interest makes your money grow faster because interest is calculated on the accumulated interest over time as well as on your original principal creating a snowball effect!

As a general rule of thumb, to see how long it takes for your savings to double, you can use the “Rule of 72”.  Simply divide 72 by the expected rate of return.  For example, if your investments return 8% annually, you can expect your money to double in 9 years.

But let’s take a look at a comparison of 2 investors:

  • Courtney invests $5,000 per year beginning at age 18.  At age 28, she stops and just keeps the money invested.  She has contributed for 10 years and a total of $50,000.
  • Axl invests the same $5,000 but begins where Courtney left off.  He begins investing at age 28 and continues until age 58 when he retires.  Axl has contributed for 30 years and a total of $150,000.
  • Ozzy is our best saver though and he invests $5,000 each year from age 18-58.  He has contributed for 40 years and $200,000 total.

At the same age 58 for all three investors:

  • Courtney has accumulated $602,070
  • Axl has accumulated $540,741
  • Ozzy has accumulated $1,142,811

The most striking difference for me is between Courtney and Axl.  He has contributed $100,000 more dollars than her and has less total money!  It’s because the investment return Courtney realized in her first 10 years of investing is snowballing.

The most important lesson in all of this is really simple….just start.  The earlier the better.  And the more automated you can make your savings habits, the easier it will be for you to save since the money never hits your bank account and for spending temptation to kick in.  Contribute to your employer-sponsored retirement plan or link your bank account to your investment account and create ongoing contribution instructions.  

While retirement (or financial independence) may seem like a long way off, it will be here before you know it and, as the saying goes, time is a thief.  Don’t let it steal your earning power!

Securities and investment advisory services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC ( Gambin Financial Group is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies. Supervisory Office 5001 Louise Drive, Suite 300 Mechanicsburg, PA 17055, 717-791-3300.