Save – The Earlier You Start Saving, The Better

Well, I think the biggest mistake is not learning the habits of saving properly early. Because saving is a habit. And then, trying to get rich quick. It’s pretty easy to get well-to-do slowly. But it’s not easy to get rich quick.

– Warren Buffett

Anyone who is disciplined and starts saving early will certainly end up financially well-off. Saving has proved to be a good investment tool over the last 150 years and for a good reason.

To prove this, let’s consider an example. Let’s assume that you start saving as soon as you start earning and invest $10,000 every year at a rate of 10% per annum for the next 30 years.

The following figure will show you the final return after a period of 30 years, which stands at $1.65 million.

On the contrary, let’s assume that you don’t save anything for the first ten years after you start earning, but in the last 20 years, you invest $15,000 every year at a rate of 12%.

The following figure will show you the final return at the end of 30 years for both the scenarios i.e. investment over 30 years and investment over 20 years, where the top post is $10,000 saved per month and the bottom post is $15,000 saved per month over 20 years.

The above figure shows that while an investment of $10,000 over 30 years at 10% per annum yields $1.65 million, an investment of $15,000 over 20 years at 12% returns only $1.10 million.

Therefore, although the return as well as the principal amount in example two increases, the final amount is much smaller than that of the first example. This proves that it is better to start saving early than to save more later.