$200 a month from age 25 or 35: the cost of waiting

Two savers

Both put $200 into an investment at the end of every month, earning 7% a year compounded monthly, until age 65. One starts at 25, the other at 35.

From 25 (40 years): $96,000 paid in grows to $524,962.68, of which $428,962.68 is interest. From 35 (30 years): $72,000 paid in grows to $243,994.20.

Ten more years of saving, $24,000 more out of pocket, ends with more than twice as much money.

Ten years, then stop

A third saver puts in $200 a month from 25 to 35 and then stops, leaving the $34,616.96 to grow. At 65 it has become $280,968.48: more than the saver who paid in for 30 years, with only a third of the deposits ($24,000).

That is compounding: growth earns growth, and the earliest money has the longest to work. Each year of delay costs more than the year before it.

The honest caveats

7% is an assumption, not a promise. Markets can fall for years, and fees and taxes reduce returns. Inflation matters too: at 3% a year, $524,963 in 40 years buys what about $160,000 buys today. Check that with the inflation calculator.

Try different rates and start ages in the compound interest calculator and pin one result to compare.