The Cost of Delay

Investors should consider the importance of investing early, whether this is for their own financial future, that of a child or grandchild starting early is the key to getting ahead. The cost of delay in not getting started early. An investor who starts contributing ten years earlier to their investment savings will after 40 years have over 60% more than there counterpart who started saving but only ten years later.  

Let’s look at an example.

Jack and Jill (20) both want to save an amount of R1, 000 per month escalating annually by 5%. Both investors are realistic with their investment goals and believe over the long term that an average annual return of 12% is achievable. Jill believes she needs to start saving straight away, while Jack believes he can afford to wait a bit longer and only start saving 10 years from now. Both Jack and Jill would like to be able to retire at age sixty.  

Assuming both Jack and Jill follow through on their investment goals, Jack will have an amount of R4.6 Million rand at retirement. Jill will retire with a retirement savings fund of over 15.6 Million Rand. That’s an extra R11 Million Rand that Jill will have at retirement which Jack will have lost out on. By Jack delaying his investment by 10 years he would have saved R650, 000 in premiums however his capital loss would have been over R10.5 Million Rand. For Jack to retire with the same amount of savings as Jill, Jack would have needed to contribute 3 times the amount that Jill was contributing.

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“It’s not easy to get rich quick!” Warren Buffett