Saving Early & Letting Time Work for You

In 1964, The Rolling Stones released "Time Is on My Side." For the band, it was a song about confidence and patience in love. For investors, the same idea applies to long-term goals like retirement. It's about confidence, patience, and giving your plan the time it needs.

If you spent years in training before your career really began, it's easy to feel like financial planning got pushed to the back burner. That's understandable. But whatever stage you're at, time is one of the most important factors working in your favor. The earlier you start saving, the more time your investments have the potential to grow.

As a young investor, you have a powerful ally on your side: TIME. The earlier you start saving, the more opportunity your investments have to increase in value.

The power of compounding. Compounding is often underestimated, so it helps to see how it works. Here is a simplified example using a hypothetical 5% annual rate of return.

How does it work?

A simplified example goes like this: If you were to start with a $1,000 principal in an account that earns 5 percent interest per year, and contribute $1,000 a year to the account, you would end up with $69,671 after thirty years, with $16,511 earned in compound interest from $30,000 in contributions. That compounding continues, even if you stop making deposits.¹

The Power of Starting Early: Let Time Do the Heavy Lifting

When it comes to building wealth, most people focus on how much they can save and the kinds of returns they can earn. While those are important, there is a third factor that is often much more powerful: Time.

The math of compound interest rewards those who start early, even if they save less in total than someone who starts later. To illustrate this, let's look at two hypothetical investors:¹

The Early Starter contributes $10,000 a year for just 10 years, then stops entirely. Total contributed: $100,000. Ending balance: $850,608.

The Late Starter waits 10 years, then contributes $10,000 a year for 30 years straight. Total contributed: $300,000. Ending balance: $888,298.

The numbers above highlight a startling reality of the financial world: effort does not always equal results. Investor 1 put in a total of $100,000 over a single decade and then let the market do the rest. Meanwhile, Investor 2 contributed $300,000—three times as much capital—over 30 years.

Investor 2 spends their entire career playing "catch-up." Even though their total balance eventually edges out Investor 1 by a small margin at age 62 ($888,298 vs $850,608), the "efficiency" of their money is far lower. Investor 1 essentially bought themselves a 30-year head start, proving that in the world of compounding, a small amount of money plus a long time is often superior to a large amount of money plus a short time.

¹ This is a hypothetical example used for illustrative purposes only. It is not representative of any specific investment or combination of investments.