Start saving early – it gives you a massive advantage.
In a recent article by Fred White (head of macro research and strategy, at Sanlam Investment Managers) he clearly illustrates the huge benefit of saving early in life. We have summarised the key points below:
If one takes the market’s 100 year average of a real return of 6% per annum:
- R1 invested at 23 years old will grow to more than R10 in real terms by the time you 63 years old. i.e. You will only have to contribute 10% of your final purchasing power. The other 90% comes for free.
- R1 invested at 43 years old will grow to just more than R3 in real terms by the time you 63 years old.
Also the later you start saving the more risky it becomes as investment time shortens and you are more exposed to market volatility. i.e. entering the market at a high which could detract from short to medium returns. A case in point is the US market has delivered a negative return over the last 10 years.
To review Fred White’s article, go to: Fund Managers Comments