OK, it probably seems like a stretch, but the person playing Pokemon Go isn’t entirely unlike the person who neglects to begin investing. As we all know, the earlier you start, the better, to take advantage of the magic of compounding. History has shown: The earlier you begin, the less you actually have to invest to achieve returns equal to or higher than a person who began later.
Bear with me. I’ll explain!
To illustrate the benefits of saving early, let’s take a look at an example. Say you begin investing at age 25, and invest every year until you’re 60. How much of an advantage would you have over someone who waited until she was 35, and invested until she was 70?
Well, at age 70, you would each have invested the same amount, $68,500. But, you would have almost $600,000, while your friend who was late to the party would only have $280,000!
*Assuming 7% annual return
What if you started at the same age, but stopped at 35, while your friend began at 35 and continued investing until she was 70. Because you started so early, you would still have more!
*Assuming 7% annual return
Even with almost 25 years and $48,000 less, you would still have more money than your friend who invested for the first time at 35.
Imagine if you bought a phone with that same logic.
Scene – Verizon store
(You, holding an iPhone 6s, in one hand, and a Zack Morris special in the other.)
You: “So this one (gesture to the brick phone) is more money?”
Teenage salesperson: (a little dazed, didn’t realize phones like this existed) “Yeee….es.”
You: “Three times more money?”
Teenage salesperson: “Yes.”
You: “And it’s not nearly as good?”
Teenage salesperson: “Yep!”
You: “Great! I’ll take it!”
End scene. You leave, broke, with a phone that weighs more than you do.
Unless you have an unfulfilled dream to be Zack Morris (hey, I don’t judge), this is not a great scenario.
Besides the huge benefits of, you know, being able to retire someday, investing early has the added advantage of letting you gloat to your friends.
“Oh me? (casually sipping a glass of Malbec) Yeah, I started investing a few years ago. Just a little bit at first, then more as I moved up the ladder at work. It feels great to have a plan in place. But enough about me. How about you? Did you finally catch that Lapras?”
This article was written by Kate Stalter from Forbes and was legally licensed through the NewsCred publisher network.
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