The main goal of modern working class professionals is the accumulation of highest value of investments by the age of retirement. For its achievement, it is vital to save on money as early as possible. Below is an example explaining the above-mentioned point.
Take the case of two investors, investor A and investor B. Investor A deposits R 12,000 each year for a period of 10 years beginning from the age of 35 without adding anything more. The total contribution by investor A comes to around R 1, 20,000. The second investor, investor B waits until the age of 45 and then, invests an amount of R 12,000 each year for the next 20 years. The total contribution by investor B comes to around R 2, 40,000. Both earn an interest of 7 % sheltered, compounded from taxes in the Registered Retirement Savings Plan.
By the time both reach the age of 65, while the investments of investor A would come to around R 686,494, the investments of investor B would come to around R526,382. The reason for the investor A doing much better than investor B is the fact that, investor A began earlier. Over time, the compounding of interest is extremely powerful.
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