We all know that money doesn’t grow on trees but, it does grow just like trees. You have to nurture it over time to see it flourish. Someone who wants an orchard cannot plant a seed and expect it to produce fruit in just a few months. Most trees will take between 6 and 9 years to produce their first fruit with up to 20 years to reach full maturity and production. Money that’s invested won’t grow enough in the first few years to provide much for your family, but after 20 years the gain is substantial!
Let’s say that a 25 yr old set aside $1 a day for 40 years (we’ll say $30.42 per month for easier computations since that equals $365).
If he/she invested it monthly at a measly 2% there would be nearly $22,500 to show for the $14,600 invested – a gain of nearly $8,000.
If it was invested monthly at 5%, the return would be $48,000 – a gain of $33,400.
When invested monthly at 10% the return would be $194,000 – a gain of $180,000!
Most people would wait until they’re 45 and save $2 a day for 20 years.
A $60.84 investment monthly at 2 % would reap only $18,000 by age 65, for a gain of just $3,400.
If invested at 5% the $60.84 monthly would reap $25,500 for a gain of $11,000.
And when invested at 10% the return would be $46,600, which is only a gain of $32,000.
Remember the total investment in both scenarios was $14,600, but the interest earned is significantly less if the savings are delayed. Hmmm. Are you willing to give up the daily coffee, candy bar or soda for a difference of nearly $168,000 when it’s time to retire?
You can run your own simple figures here to see how any savings amount would gain money over time.
As a post note – I ran a figure for a friend just for fun. If she had her child invest $1 a day at 10% starting at age 13, the gain would be $649,000 by the time her child was 65! By the time my friend expects to be a grandmother she can save $1 a day and lump deposit $1,000 on the baby’s 2nd birthday (saving from the 3rd month of pregnancy). At 10% interest the child would have $530,000 upon turning 65. Talk about an easy way to leave an inheritance for your children’s children (Proverbs 13:22) – even my math loving mind is boggled!
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