Let’s assume you start saving at the age of 25. You save $100 a month and you do so every single month, until you are 65. You put it in a good S&P 500 index with an average market return. At 65, you’ll have a million dollars!
But if you wait just 10 years. Still saving the same $100 a month, which is only $1,200 a year, $12K for the full 10 years. If you wait only those 10 years and start at 35, when you get to 65 you’d only have $300,000. Those 10 years cost you $700,000 at $100 a month.
If everyone were to hear the above comment before they are 25 and follow it, they would have been in a much better financial situation. This is why “start investing early” is the best advice you could have received and should offer to any young person you care about.
The discipline of starting to save early on takes advantage of the basic, but most powerful saving machine known as compound interest. What is compound interest? Compound interest is when the interest you earn on a balance in a savings or investing account is reinvested, earning you more interest, or as our CTO, Freddy Tenaglia says, “Money makes money.” Compound interest accelerates the growth of your savings and investments over time. You don’t need big amounts to start with.
First things first. Start the habit and maintain it. Different approaches exist as to how much to save and how it will change based on changing circumstances over time. A good rule of thumb that will work pretty well is the 80/20 rule. In a very simple way it says that you save/invest 20% of your monthly income regularly. While your income goes high, your monthly savings contribution goes high, and combining that with the compound interest mentioned earlier and the “start investing early” rule should set you up for a better financial future.
At MAPLE, our mission is to empower you and make sure you understand all concepts of wealth management. Our platform is built in a way that helps you manage your finances in an ever-changing environment. It provides you ongoing recommendations and predictions on your wealth growth. It does it while looking into your goals and provides you with options to optimize the path to get there. MAPLE makes sure that any change, personal or market wise, is not ignored. The power of compound interest is built into our recommendation engine, so your money will continue to work for you and make even more money.
