What’s a cool/useful skill that only takes five minutes to learn?

The link given below takes less than 10 minutes to read.

If you invest about 97$ a week (~$5,000/year) for just ten years starting when you are 25, the value of the account will be $602,000 at age 65. $50,000 total investment.

If you wait 10 years and start investing money at the same pace when you are 35, and do so for thirty years, the total amount of your investment will be just $540,000 at 65. Total investment $150,000.

Even after 30 years of saving, you will not catch up with the person who saved for just 10 years, and who stopped saving the day you started saving.

Digest this thought.

  • Waiting just 10 years to start saving has a HUGE impact on your future.
  • You can actually put aside less and have more in the end if you start earlier.

The long and short of it:

  • If you save $5,000/year from ages 25-65, you’ll have over a million dollars. ($200,000 total invested).
  • If you save $5,000/year from ages 55-65, you’ll have around $72,000.  ($50,000 total invested).

Reference:  Every 25-Year-Old In America Should See This Chart.  This is not the best detailed reference, and is very much over-simplified –but it can be understood in less than 10 minutes. This page uses an investment return rate of 7%, which is about what the stock market averaged from 1873-2013, and much more than you can ever hope to get in a bank savings account.

Hopefully the page will spark your interest to look further. I wish I had read this chart when I was 25, which though that was over 30 years ago, seems like yesterday.

For more information, Google “the value of money over time” and find a variety of calculators that can help you understand this concept.


Note: Your mileage may vary!

  • These charts use about 7% average stock market growth rates … and rates aren’t guaranteed, but the idea is sound.
  • The 7% seems to be the rate cited by many financial advisers. (Play with the calculator on the page, Annualized Returns of the S&P 500, to look at how annual growth rates have varied in the stock market).
  • One thing for sure, you will never (ever) be able to match this  rate in traditional savings accounts.
  • For  conservative planning,  you may want to assume a rate of 4-6%. I hope for 4% and cheer when I get anything higher. I cheer a lot. Set yourself up for more cheering than booing!
  • The farther you are from retirement, the more wiggle room you have.
  • Middle class Americans have less than $20K saved for retirement, explaining that they plan to “catch up later”: http://www.usatoday.com/story/money/personalfinance/2014/10/22/retirement-savings-middle-class/17681877/
  • Americans have a rather low savings rate:  Gross savings (% of GDP). (Examples: Afghanistan = -15%,  Sudan = 2%, United States = 17%, Angola = 17%, Pakistan = 20%, India = 30%, Vietnam = 32%, Bangladesh = 40%, China = 50%, Qatar = 52%)
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