If you have built castles in air, your work need not be lost; that is where they should be. Now put the foundations under them. —- Henry David Thoureau, Walden.
In the previous post , I had mentioned about the importance of time value of money. Let us see here the impact of the same over a period of time on investments – And why investing early and then making it work for long periods of time makes such a BIG difference.
In this example , Early Investor starts putting aside Rs 10,000 a year beginning age of 22 yrs until the age of 30 and then decides to stop making contributions. Over this time, he puts aside a total of only Rs 90,000.
On the other hand, Late Investor doesn’t start making contributions until he is 31 and puts aside Rs 10,000 a year until he reaches age 65. Over that time, his contributions total Rs 3,50,000.
In both cases, assume that their account grows 10% a year. Despite the fact that Late Investor contributes almost 4 times , at age 65 his account is hardly 2/3rd as compared to the Early Investor!!!!
This clearly illustrates the benefit of starting to invest early.
The power of time and impact on the the value of money, the benefit of investing with patience and discipline and the magic of compounding is truly amazing.
Even, if it may be late for some of you to maximize your lifetime investment potential, it may not be the case for your children.So, go ahead, start thinking , plan , and invest for long terms with conviction.
You will find the related post on Time Value of Money as interesting as it is one of the most important concepts in finance.