Have you ever wondered why financial experts keep telling you to start saving early for retirement? The answer lies in the magic of compounding interest!
In a nutshell, compound interest means the money you save or invest earns you more money. Here’s an example, imagine you invest $100 with a 6% annual interest rate. In the first year, you'd have $106. But in the second year, you earn interest not just on your initial $100 but also on the $6 interest!
This creates a snowball effect in which the money your invest grows larger the longer you leave it invested. And that means the earlier you start, the bigger the snowball.
Let's see how this plays out. If Gloria starts saving $200 a month at age 25, and Brian starts saving the same amount at age 35, Gloria will have made significantly more by the time they're both 65, thanks to those extra 10 years of compounding interest.
The key takeaway? Start saving as early as possible! Time is your greatest ally when it comes to building a robust retirement fund. The sooner you start, the more comfortable your retirement could be.
Need help getting started? Contact a financial professional today or visit equitable.com/retirement to start planning for your future!
