A Personal Finance Blog for Malaysian: The Power of Compounding

Wednesday, July 21, 2010

The Power of Compounding


Mr. Young, age 18, start invest RM2,000 per year over a period of 8 years, then stops.

Ms. Late, age 26, start invest RM2,000 per year over the next forty years.

Even Ms. Late contributes RM64,000 more than Mr. Young [(40 years - 8 years) * RM2,000 per year], she can never catch up ; at age 65, Mr. Young 's fund will be worth RM1,035,160 while Ms. Late's will be only RM885,185.

* Assumption: 10% annual return for both, no transaction costs or taxes.

TIME, is one of the most important advantages for retirement planning. Procrastinating can be very costly. As the saying goes, time is money!!

Click here for the table of illustration.

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