The Power of Starting Early: How Saving Less Can Lead to More
This is a story of “Saving Sara” and “Delay Dan”. Both Sara and Dan start their first job at 21. While they aren’t earning much, they do have money left over after their needs are met.
Sara, having learned the power of saving early, begins investing $2,000 per year at age 21 and stops after just 10 years.
Dan decides to put off saving and spends his surplus income. He waits until age 31. Trying to catch up, he invests $3,000 annually – $1,000 more per year than Sara did – for the next 35 years.
So who ends up with more by age 65?
Despite saving only $20,000 compared to Dan’s $105,000, Sara ends up with nearly $1 million—about $91,000 more than Dan. Why? Compound growth. Her money had more time to grow, and that time turned a small sacrifice into long-term wealth.
Despite saving only $20,000 compared to Dan’s $105,000, Sara ends up with nearly $1 million—about $91,000 more than Dan. Why? Compound growth. Her money had more time to grow, and that time turned a small sacrifice into long-term wealth.
What To Do?
- Time is a powerful lever – The earlier you start, the more your money can grow.
- Catching up requires more effort – Sara stopped saving after 10 years, yet came out ahead. Dan, never caught up even though he saved 5x what Sara saved.
- Delaying has a cost – Even saving more over time may not catch up if you wait too long.
