If there is a magic ingredient to successful investing, it’s time. Quite simply, the earlier you start saving, the better.
Don’t make the mistake of thinking that you don’t earn enough money to save, or that retirement is too far away. Even saving a little bit adds up over the long term. So no matter your age, or how much you earn, now is the time to start saving in a quality retirement plan. Waiting even a few months could mean less money in your nest egg when you retire.
Why? It’s all about the power of compounding.
Compounding allows you to make money not just on the money you contribute, but also on the money it earns (the “rate of return”). So if you invest $100 and it earns a 5% return in one year, you now have a principal of $105. The following year, if you also earn a 5% return, you earn it on $105 (not just the initial $100) and you now have $110.25. As your principal grows, your gains will grow, too, compounding your returns. The more time you have until retirement, the longer the magic of compounding can work, growing your savings faster than you imagined.
Even a small amount set aside each month has the power to grow exponentially over the years. Especially when you start young.