Here is an example of why it is so important to start saving early. Let's say a set of twins went to work at age 22. The first sibling, Chris, decided to start saving $700 per month. After ten years, Chris got married, started having more expenses (house, vacations, children, etc.) and stopped saving. If the investments earned an average of 8% per year, after ten years, Chris would have $126,898. Without adding anymore to the account, the investments would grow to $273,964 after another ten years (age 42), then $591,468 at age 52, and $1,276,937 at age 62. The total amount that was contributed to Chris’ account was $84,000.
Chris' sibling, Pat, wanted to splurge and spend money, with a plan to start saving for big things later. Pat decided to starting saving in ten years and stop when the account has caught up with the account that Chris has. So, at age 32, Pat starts saving $700 per month and earns the same 8% that Chris does. When Pat is 42, the account has grown to $126,898. Pat has not caught up with Chris, so $700 is added per month to the account. At age 52, Pat’s account balance is up to $400,862, and at age 62, it is up to $992,330. Even though Pat has contributed $252,000 (three times as much as Chris) over 30 years, the account is still $284,607 behind (and getting farther behind every month).
To summarize for each sibling's account: Total ContributionsAccount Value AgeChris'sPat'sChris'sPat's 22 $0 $0 $0 $0 32 $84,000 $0 $126,898 $0 42 $84,000 $84,000 $273,964 $126,898 52 $84,000 $168,000 $591,468 $400,862 62 $84,000 $252,000 $1,276,937 $992,330