Have you ever thought about your retirement plans when you started your carrier? Nobody does it and even investing will not be of top priority to them. Not all start their carrier with a lump sum package but this should not deter the individuals from stop making investments. Savings is very important to secure the financial future of the individuals. The early stages in a work carrier will have a great impact in their financial status. Planning earlier about retirement will help you to get better returns in the long run. This article will explain about the various benefits of investing early in life.
Benefits of Compounding: Compounding of returns is the greatest ever benefit of early investments. Compound interest is the interest amount earned on your interest and ploughing back the returns to your investment will mark a significant change. Even a monthly investment of $40 per month will give you great returns in the long run. Let’s see how it works!!
A Simple Calculation
Simple Math – 1:
X is 25 years old and has got 35 years of work life left and he invests $20 per month at a rate of 12% returns per annum. At the end of 35 years, X will have a corpus of $1,00,000 in his hand.
Y is 30 years old and has got only 30 years of work life left where he invests $20 per month at a rate of 12% returns per annum. At the end of 30 years, Y will have a corpus of just $60,000 in his hand.
Are you stunned to see the difference of amount in delaying your investment by just 5 years? And Y has to invest $23 per month in order to get $1,00,000 as corpus at the end of 30 years.
Simple Math – 2:
Now let’s assume that X and Y are both 30 years of age and have 30 years of work life left with them.
X invests $40 INR per month for 15 years at the rate of 12% returns per annum and stops after that. He would have made $7000 as investment totally and he has decided not to withdraw funds from the investment until he retires (at the age of 60). His total corpus would have raised to $1,00,000 at the end.
Y invests $20 INR per month for full 30 years of his work life at the rate of 12% returns per annum. He also would have made an investment of $7000 which is the same as X but still his corpus would be only $60000 at the end. The corpus for X is higher because he started investing more money in his initial days. This helped him to gain advantage over Y.
Do you understand the value of start investing early in your life? It will definitely help you when you get retired and it is always good to save for the rainy season.