A penny becomes a dime

By Patrick Allan via lifehacker.com   Article

A Dollar Saved in Your 20s is Equal to Ten Dollars Saved in Your 50s

“Saving money with compound interest is not a new concept, but G.E. Miller at 20somethingfinance explains why putting away money early is so important in an easy-to-understand way.

With the current average annual rate of 8% on investments over 30 years, a dollar now will be ten dollars later. Even if you adjust for inflation, Miller explains that you’ll have over 500% the buying power later for every dollar you save today. …

William, starts saving $4,000 a year when he is 20 and stops after 20 years, after having saved $80,000. His brother, James, starts saving $4,000 at 40, and does so for 25 years, for a total of $100,000 saved.

They earn 6% on their savings.

At age 65, William will have $850,136 in his account, while James will have only$219,242. Despite having saved less, William’s nest egg will be almost four times greater because of compounding

You may not be able to save four grand a year in your twenties, but the savings hammer should be banging you over the head. A penny saved is a dime earned.”

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