When it comes to saving it’s never too early to start.

One of the many advantages of starting early is the effect of compounding interest.

Compounding is when you reinvest the interest you earn on your investment. If you continue to do this over a few years, you’ll be earning interest on your interest on your interest…

Over the medium to long term, compounding can be an effective means of accelerating the growth of your savings.

Take the example of Carol and Jim, who are both aged 40 and intend to retire at age 60.
Carol – invests $1,000 per month for 20 years.
Jim – invests $2,000 per month – but does not start until he is 50.
Assuming their investments generate 8% growth per annum after tax, despite Carol and Jim both contributing $240,000, Carol’s savings are significantly greater due to the effects of compound interest.