Use your Group Retirement Plans to start saving early

One of the key principles of saving is to start sooner than later.  When you are young, saving and investing can be intimidating which is why a workplace savings plan can be a great way to start.

To begin with, not all companies have a group savings plan in place.  A study from the Canadian Federation of Independent Business (April 2010) showed that 78.5% of all companies did not offer a group retirement savings plan at all.  The bigger the company, the more likely it was that a plan was in place.  For companies with 100 to 499 employees, only 35% of employers did not have a group retirement plan in place

If you are part of the lucky few that have a plan in place through work and your employer matches part or all of your contributions, consider yourself lucky as you are in a position to get ahead and start early.  Even if the employer does not have a matching plan, it is still advantageous to start a savings plan through work.

Investing early is very advantageous because the math of compound interest plays a big role in helping you to grow your money.  Compound interest has sometimes been referred to as the eight wonder of the world.  Let’s show you a quick example of the benefits of starting early.

Early Elizabeth is 25 and starts investing $1000 per year right away.  She invests $1000 per year for the next 10 years for a total of $10,000 but then gets married, starts having kids and wants to stay home with the kids so she quits work.

Elizabeth’s twin brother late Larry took some time off to travel Europe.  He then came back and instead of working decided to go back to school and get another degree.  He starts working at the age of 35 and starts putting away $1000 per year for the next 30 years.  Over that 30 years, he invests a total of $30,000 which is three times more than his sister Elizabeth.

At age 65, Elizabeth and Larry compare portfolios and Larry is shocked to see that he only has $122,346 compared to Elizabeth’s portfolio of $157,435.  Even though he invested 3 times the money, he has less because compounding plays a big role if you can start investing sooner than later.

Written by Jim Yih

Jim Yih is a Fee Only Advisor, Best Selling Author, and Financial Speaker on wealth, retirement and personal finance. Currently, Jim specializes in putting Financial Education programs into the workplace. For more information you can follow him on Twitter @JimYih or visit his other websites JimYih.com and Clearpoint Benefit Solutions.

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