Savings accelerator - MoneySense

Savings accelerator

By taking advantage of compound interest you can make your portfolio work harder than you.


savings accelerator
The early bird gets the worm, especially when it comes to building your savings. The earlier you start, the more time your savings have to benefit from compound interest. When you start investing, most of your growth comes from your contributions, but because of compounding, the interest on your investments will eventually contribute more to your growth than you do. By starting early, you can contribute less overall. For example, if you start saving $100 a month at age 25 (see “Early starter,” below) and you earn a 6% annual return, you’ll have saved about $140,000 by the time you hit age 60. If you were to start saving 10 years later (see “Late saver,” below), you would have to save $200 a month for 25 years to catch up.