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Save early to earn more

Save early to earn more Prabhakar Sinha | TNN Time is money, goes the saying, which holds true in almost all aspects of life. But, it is more so in case of savings. If you start saving early, by the time you retire, you will have enough money to lead a prosperous retired life. When you start saving early, your saved amount gets a longer time to earn returns. Take for example, if you start saving at the age of 25, or just at the time when you get your first salary, your savings of Rs 5,000 per month, at a conservative return of 10% per annum, will swell to Rs 1.91 crore in 35 years or by the time you retire at the age of 60. But, if you start saving late, say, at the age of 30, your saving of Rs 5,000 per month will become Rs 1.14 crore. If you start at 35, the amount will become only Rs 67 lakh. And, at the age of 35, even if you start saving double the amount i.e. Rs 10,000 per month, by the time of retirement, that will become only Rs 1.34 crore. This is called power of compounding. At the rate of 10%, a savings of Rs 5,000 per month becomes Rs 3,90,412 after 5 years. This means, by then your saved amount will earn around Rs 39,000 per annum, which is around 65% of the amount that you are saving. In 10 years, your saving will swell to Rs 10,32,760, whose earnings itself will be more than 1.7 times of your monthly savings. That means, by the age of 35, your savings will earn more than your monthly savings. After 25 years, your savings become Rs 67 lakh and contribute Rs 6.70 lakh in your net saved amount every year thereafter, which is more than 11 times of your savings. So, if you will give more time to grow your money, more you will benefit.
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