ADVANTAGE OF EARLY INVESTING

The Advantage of Early Investing tool is designed to show you how you can take advantage of the power of compounding to achieve your personal retirement goals. Virtually every guide to personal investing will tell you that the best way of meeting your retirement goals is to start early, invest on a regular basis and stay invested until retirement. That's because investing earlier on in life and taking advantage of compounding investment returns can produce better results than investing later in life and with more money.

The following example will help illustrate this point. Dave started his investment at the age of 25 with an initial investment of $1000 and beginning a monthly contribution program of $100. Beth didn't start saving for her retirement until 35, but she opened her RRSP with an initial investment of $2000 and commits to a monthly savings program of $200. Finally, Mark opens his RRSP at 45 with an investment of $3000 and a monthly contribution program of $300. Dave, Beth, and Mark are all saving until retirement at 65 and will each realize an annual return of 10% on their investment. Although they begin investing 10 years apart from each ther, Beth is making twice the contributions Dave is making and Mark is making three times his amount. Beth and Mark should be better off than Dave, right? Not at all. Take a look at the results.

Despite investing less than both Beth and Mark, the value of Dave's invesment at the age of 65 is substantially greater. Because Dave started early, invested regularly, and stayed invested until retirement, he was able to turn a smaller overall investment into a larger balance at retirement. Use the Advantage of Early Investing calculator to try different investment scenarios and find out exactly how important it can be to start saving for retirement sooner than later.

Investment Details – The Investment Details section allows you to input a variety of investment scenarios to illustrate the advantage of early investing.


Start Age – The Investment Details section allows you to input a variety of investment scenarios to illustrate the advantage of early investing.


End Age – Indicate the age at which you will stop investing. Keep in mind that the tool calculates growth only between the start age and the end age. For a meaningful comparison, each scenario should have the same end age.


Initial Deposit Amount – This is the lump sum amount you intend to start investing with.


Periodic Deposit Amount and Deposit Frequency – Use these two fields to indicate your regular deposit amount and the frequency with which you will be making your deposits.


Annual Rate of Return – Indicate the average return on investment you expect to receive. The primary objective of this tool is to compare the value of differing investment amounts over different time periods. To make the comparison as fair as possible, try to use the same Annual Rate of Return across each scenario.
You can also use the calculator to compare the value of the same investment using three different Rates of Return. In this case, use the same age and deposit figures in each of the three scenarios, while using different Annual Rates of Return.


Once you have completed all fields, click on the "Next" button to view the results.