“Wealth, like a tree, grows from a tiny seed. The first copper you save is the seed from which your tree of wealth shall grow. The sooner you plant that seed the sooner shall the tree grow. And the more faithfully you nourish and water that tree with consistent savings, the sooner may you bask in contentment beneath its shade.”
George S. Clason, Richest Man in Babylon
The real secret to compound interest is less about the amount that is saved, and more about the amount of time it is invested. One final advantage to begin saving and investing earlier rather than later is that the stock market presents a much better opportunity for long-term investors than it does for short-term investors.
Although nothing is ever guaranteed when it comes to investing, history shows that the longer you are invested, the greater your chance for favorable returns. What truly matters in investing is not timing the market but time in the market. Get money invested early so your time horizon is long enough to ride out short-term market volatility in pursuit of long-term gains and achieving long term goals.
Pay Yourself First and Automate Your Investments
It is recommended that you pay yourself first and that at least 10% to 15% of your income is saved into your retirement accounts.
Most Americans tend to save wants leftover after paying their monthly bills and spending on discretionary items. Instead, a better way is to spend what is left after first putting a percentage of income into savings. The easiest way to make this happen consistently is by setting up automatic contributions from each paycheck to a retirement savings account. But don’t stop there. It is also recommended that you increase your contributions each year or with each raise.
A small increase in your contributions won’t be very noticeable, but it will make a big difference in your balance over the long term.
- The longer your money is invested, the more compounding you experience.
- Stock market should be viewed as a long game, not a quick turnaround.
Because of these reasons, you should start saving and investing today.