Cost of Delaying Savings in Your Life
“Start NOW with what you have”
“The eighth wonder of the world is compound interest,” rightly said by none other than Albert Einstein. Most of us live with this mindset that it hardly makes any difference if we don’t begin saving right away. However, time has a drastic impact on one’s financial well-being. Simply put, if we start early, we will always stand to gain significantly more. Let us see how:
Suman is 25 years old and has decided to retire at the age of 60. Suman can start saving now or postpone it to a later date. Assuming that the return on investment is 10%, following is the impact of delaying savings:
Suman is short by almost AED 2.5 million by the time of retirement! A significant cost of delaying saving just AED 1000 per month for 10 years!
Even if Suman decides to increase his monthly investments in the second and third scenarios with an aim to see that at least the total investment remains same across all the three cases, even then, he is unable to catch up due to lost time.
Delaying savings by even one year reduces your wealth by almost AED 500,000 by the time retirement comes along. Think about that! Moral of the story is, save now, even if it is small – compounding is your friend and it needs time.
If we have convinced you to start saving today, then the next obvious question is how to save? Keep it simple is our mantra. Based on your risk appetite, regular investments in the stock market through ETFs or Mutual Funds over a long period of time, has the potential to translate to reasonable sums of money. Using Systematic Investment Plan (SIP) makes life easier as the amount gets auto-debited from one’s bank account on a fixed date. It removes decision-making from your hands and forces you to save in a disciplined way.
Patience is a virtue and one should stick with regular savings to see the benefits of early investing. Avoid withdrawing your investments mid-way thinking that they have earned decent returns. The fact is, returns start to compound over time and more money makes more money. Any questions? New Age Insurance Brokers in Dubai are happy to help!