The information in this post is provided by our partner Accel Financial Counseling. Accel’s counseling services and educational programs are available free to all Consumers members.
The earlier you start saving, the more you will benefit from compounding interest. This is the interest earned on interest payments already built up in an investment fund. The earlier you begin, the larger your nest egg will grow.
Here’s an example of two friends, Grace and Drew, who had different savings strategies. Grace saved $1,000 a year for 10 years, starting at age 25. Drew saved $1,000 a year for 25 years, starting at age 40. Both earned the same 8 percent return.
Who ended up with more money at age 65? It had to be Drew, right? Wrong. Grace benefited from her head start and the power of compounding. Here’s the breakdown:
|Began saving at 25||Began saving at 40|
|Saved for 10 years||Saved for 25 years|
|Age now is 65||Age now is 65|
|Total saved: $10,000||Total saved: $25,000|
|Savings grew to $157,435.17||Savings grew to $78,954.42|
Totals assume $1,000 savings is made at the beginning of each year.
Need to talk to a financial counselor about saving money? As a member of Consumers Credit Union, you can take advantage of the Accel program, a free financial education and counseling program. Accel counselors are available Monday through Thursday 8 a.m. to 12 a.m. (EST), Friday 8 a.m. to 7 p.m. and Saturday from 9 a.m. to 1 p.m. To use this service, simply call 1-877-33ACCEL (332-2235) or visit them on the web at www.accelservices.org