The following table shows why compound interest is such a great thing. Saving $50 a month earning a 6% rate of return, can give you a nest egg of $23,200 in twenty years. And in thirty years it can give you $50,500. Not bad for $50 a month.
The Beauty of Compound Interest*
Monthly Savings
In 15 Years**
In 20 Years**
In 30 Years**
In 35 Years**
$10 ($120/yr.)
$2,900
$4,600
$10,000
$14,200
$50 ($600/yr.)
$14,500
$23,100
$50,200
$71,200
$100 ($1,200/yr.)
$29,100
$46,200
$100,500
$142,500
* Calculations made from a standard Time Value of Money table.
** Assumes a 6% rate of return.
Still think you're too young to start saving for retirement? If you are 35 years old and save just $2,000 per year from now until age 65, at a 6% rate of return, you'll have almost $167,400. But, if you wait until you are 55 to start saving, you will have to save approximately $15,600 per year at 6% to give you $213,000 at age 65. It's better to start smaller and earlier, and keep it up.