If you could go back and change the way you looked at money when you were 18, 21 or 25 would you? I would. Even though I started saving and investing at 23, I think having the mindset to save early and often around 20-21 would have been a benefit.

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Financial independence and saving at least 30-50% towards retirement weren’t even ideas in my head until a couple of years ago. I’m just fortunate that 9 years ago I started investing part of my paycheck into my 401(k). And these last 9 years the market as a whole has done very well. If this isn’t your first time listening to this podcast then you and I know tomorrow, 1 year from now, the next 5 years the market could go down. This is why we save for the long-term. We’re not looking for some get-rich-quick scheme. You won’t find anything like that here.

My mission is to bring you the education and tools to help you build wealth and at the same time get your life back and make a difference in your own life, your family’s, non-profits, organizations you care about, your community.

Why save early? Because it could be the difference between you working and saving until your 70s not because you want to, but because you have to. If you had a late start on saving I wouldn’t sweat it too much. Try to push your savings rate closer to the 50% range, the more the better and realize that more important than money and financial independence are the relationships and causes that only require your presence and time.

Alright, before I get too far into my soapbox let’s get back to what this episode is about…the importance of investing early. The importance of just starting as soon as you can when it makes financial sense.

So for this episode, we’re looking at what kind of nest egg a person could have depending on what age he/she starts investing. We’ll look at ages 20, 30, 40, 50 and the retirement age will be set at 65. For all the calculations, we’re going to use the commonly accepted annual interest rate of 8% the market makes as an average. (The market has been growing at about 11%, but with inflation and to keep this exercise as conservative as possible I’m going to go with 8%). We’ll also look at various savings amounts, you know just to get a really good picture of the opportunities we all have.

Saving In Your 20s

So for my 20-year olds who are looking to the future thinking you have your whole life to start investing, well first change that mindset today. You have the greatest advantage of anyone: time. You have the time to take the hits and blows the market gives. If you start saving $200/mo earning 8% year over year until 65 you would have a nest egg of $1,054,907.98. Let’s say you double the amount you save to $400 and you would have about $2.1 million. At $400/mo you become a millionaire at the age of 56. And this is only if you save no more than $400/mo and have no other investments. You see why you need to start today?

Saving In Your 30s

Alright fellow 30-year olds. We don’t have that 10-year head start that the 20 year olds have, but starting at 30 is not so bad. Hopefully by now you’re in a position where you’re earning a decent amount of money to be able to save and invest more than $200. But let’s see how much of a difference waiting 10 years will have. Saving $200/mo from age 30 to 65 earning 8% interest will yield about $458,776.50. Not even half of what the 20-year old made by simply starting 10 years earlier than you. To get to a million dollars by the age of 56 you have to save about $1,000/mo. Isn’t that interesting how 10 years can have such a big impact.

Saving In Your 40s

Now for my 40-year olds who have 25 years to invest before reaching 65. It may be difficult, but 25 years is still a decent amount of time to save and invest. $200/mo over 25 years earning 8% yields about $190,205.28. That’s tough, because you may think about what could have been right? Well if you can somehow get your savings amount up to somewhere between $1,000 to $1,100 you may very well be close to a million dollars. That’s decent provided you waited till you turned 40 to start investing. You’ll definitely need a higher savings rate and hopefully you’ll be motivated, because it is doable.

Saving In Your 50s

Alright, finally my 50-year olds who are getting a little long in the tooth. Hopefully you’ve done some saving throughout your life and if not it’s ok. And I’ll tell you why after we do our calculations. Saving $200/month until 65, earning 8% will give you about $69,207.64. If you begin to save at this age and only put away $200/mo, you’ll be a millionaire by the time your 95…yeah.

This is why you do other things like have life insurance if possible. I checked the cost for a $500,000, 20-year term policy for a 50-year old male in excellent health and the result was about $76/month over at Haven Life. If you’re worried about passing and not having anything to leave behind getting a term life insurance policy is a great placeholder while you save and invest as much as you can over the duration of that term policy. You can also look into real estate and other types of investments where you’re not taking on such a big risk. But all this starts with you. Just because you’re on the other side of 50 doesn’t mean you can’t achieve financial independence. You can and spending some time with a financial advisor could serve as a huge benefit.

Final Thoughts on the Importance of Investing Early

Whether you’re 20 or 50 the important takeaway is that you understand the importance of saving as early as you can. Learn to live on less than you make and come up with a 5, 10, 20-year financial plan and how to achieve the goals in that plan. Time is your greatest advantage when it comes to investing, remember that. Simply look at the below complete, and might I add very aesthetically pleasing chart.

Amazingly, investing $200/mo at the age of 20 doesn’t mean you personally save an enormous, amount of money. In the grand scheme of everything, you only contributed about 10% of the final $1 million. In the other scnearios starting at ages 30, 40 and 50 you contributed 18%, 31% and 52% respectively for the final, total amounts. By investing in your earlier years of life you build a greater nest egg for yourself.