Compound interest and why it pays to save early

Put your money to work for you

With a combination of time and compound interest, your goals are nearer at hand than you might think.

In case you haven't heard, compound interest is the best. It powers all sorts of savings and investment products and, over time, allows you to turn your money into even more money!

So, how does it work?

One of the great things about savings and investments is that they earn interest. With compound interest, those earnings are reinvested into your principal. Your principal grows and, as a result, earns even more interest. The longer you can keep this compounding equation going, the more money you’ll earn in the end.

A little means a lot over time

Everyone needs to start somewhere. Although it's important to speak with your financial advisor to personally plan for your retirement, even a bi-weekly pre-authorized contribution of $50 will grow steadily over time. At a return rate of 5%, you can see that in just 10 years you'll already have $16,878.57.

After 35 years that number will jump to $123,652.70. As you can see the growth is quite exponential thanks to power of compound interest. That’s also why it’s so important to start saving early – you can end up with a lot more money, even while making fewer or smaller contributions.

The above chart is intended for illustration purposes only and not tax or planning advice. For tax and planning advice, visit an Affinity Advice Centre or call our Contact Centre at 1.866.863.6237.

Consistency is key

Small contributions can turn into big earnings over time so get started today. Take the hassle out of saving and set up a pre-authorized contribution into your savings, RRSP or TFSA. That way you can’t use forgetfulness as an excuse!

Ready to put your money to work for you? Call our Contact Centre at 1.866.863.6237 or book an appointment to learn more about saving for your future.

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