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The Power of Saving with Funds

Do you want to know the power of saving with fund? Please take a look of the following cases: 

A started her saving investment plan at the age of 21 with an annual investment amount $36,000 ($3,000 per month). She continued to invest the same amount of money for 15 years until the age of 35 and then stopped any further contribution. The accumulated amount was kept in the saving plan for further growing until retirement at age 60.

B started his saving investment plan at the age of 36 with an annual investment amount $36,000 ($3,000 per month). He continued to invest the same amount of money for 25 years until retirement at age 60.

Case Investment Age Duration Total Investment Amount Total Accumulated Amount
at age 60*
Start End Return 5% Return 9%
Miss Lam 21 35 15 Years $540,000 $2,762,147 $9,934,844
Mr. Ma 36 60 25 Years $900,000 $1,804,084 $3,323,663
* Assume the annual return 5% or 9% with annual compounding
View the annual investment and return details:  At 5% Return Rate  At 9% Return Rate

Now, you can see the power of saving with funds! Miss Lam had invested 10 years less than Mr. Ma, but the accumulated value she got at the age of 60 was even more than that of Mr. Ma!

How could the saving with funds have such a huge power? Actually, the miracle of time value is the basic of saving with funds. The "Compound Interest Formula" could illustrate:

Sum = Principal x (1 + Interest Rate) no. of periods

As the number of periods is an index, when it increases, the sum increases even more like a rolling snowball due to the compound effect.

"Time is Money", because of the strength of "Compound Effect", the earlier one starts to invest, the more satisfying return becomes. This is why the earlier investor, Miss Lam, invested less but was rewarded more.

Appendix 1 - Annual Investment Detail:
(5% Annual Return Rate)
Back

Age Miss Lam Mr. Ma
Annual Contribution Accumulated Amount
at Year End
Annual Contribution Accumulated Amount
at Year End
21$36,000$37,800$0$0
22$36,000$77,490$0$0
23$36,000$119,165$0$0
24$36,000$162,923$0$0
25$36,000$208,869$0$0
26$36,000$257,112$0$0
27$36,000$307,768$0$0
28$36,000$360,956$0$0
29$36,000$416,804$0$0
30$36,000$475,444$0$0
31$36,000$537,017$0$0
32$36,000$601,667$0$0
33$36,000$669,551$0$0
34$36,000$740,828$0$0
35$36,000$815,670$0$0
36$0$856,453$36,000$37,800
37$0$899,276$36,000$77,490
38$0$944,240$36,000$119,165
39$0$991,452$36,000$162,923
40$0$1,041,024$36,000$208,869
41$0$1,093,075$36,000$257,112
42$0$1,147,729$36,000$307,768
43$0$1,205,116$36,000$360,956
44$0$1,265,371$36,000$416,804
45$0$1,328,640$36,000$475,444
46$0$1,395,072$36,000$537,017
47$0$1,464,826$36,000$601,667
48$0$1,538,067$36,000$669,551
49$0$1,614,970$36,000$740,828
50$0$1,695,719$36,000$815,670
51$0$1,780,505$36,000$894,253
52$0$1,869,530$36,000$976,766
53$0$1,963,006$36,000$1,063,404
54$0$2,061,157$36,000$1,154,374
55$0$2,164,215$36,000$1,249,893
56$0$2,272,425$36,000$1,350,188
57$0$2,386,047$36,000$1,455,497
58$0$2,505,349$36,000$1,566,072
59$0$2,630,616$36,000$1,682,176
60$0$2,762,147$36,000$1,804,084
61$0$2,900,254$36,000$1,932,089
62$0$3,045,267$36,000$2,066,493
63$0$3,197,531$36,000$2,207,618
64$0$3,357,407$36,000$2,355,799
65$0$3,525,277$36,000$2,511,388
 
Appendix 2 - Annual Investment Detail:
(9% Annual Return Rate)
Back

Age Miss Lam Mr. Ma
Annual Contribution Accumulated Amount
at Year End
Annual Contribution Accumulated Amount
at Year End
21$36,000$39,240$0$0
22$36,000$82,012$0$0
23$36,000$128,633$0$0
24$36,000$179,450$0$0
25$36,000$234,840$0$0
26$36,000$295,216$0$0
27$36,000$361,025$0$0
28$36,000$432,757$0$0
29$36,000$510,945$0$0
30$36,000$596,171$0$0
31$36,000$689,066$0$0
32$36,000$790,322$0$0
33$36,000$900,691$0$0
34$36,000$1,020,993$0$0
35$36,000$1,152,122$0$0
36$0$1,255,813$36,000$39,240
37$0$1,368,837$36,000$82,012
38$0$1,492,032$36,000$128,633
3901,626,315$36,000$179,450
40$0$1,772,683$36,000$234,840
41$0$1,932,225$36,000$295,216
42$0$2,106,125$36,000$361,025
43$0$2,295,676$36,000$432,757
44$0$2,502,287$36,000$510,945
45$0$2,727,493$36,000$596,171
46$0$2,972,967$36,000$689,066
47$0$3,240,534$36,000$790,322
48$0$3,532,182$36,000$900,691
49$0$3,850,078$36,000$1,020,993
50$0$4,196,585$36,000$1,152,122
51$0$4,574,278$36,000$1,295,053
52$0$4,985,963$36,000$1,450,848
53$0$5,434,700$36,000$1,620,665
54$0$5,923,823$36,000$1,805,764
55$0$6,456,967$36,000$2,007,523
56$0$7,038,094$36,000$2,227,440
57$0$7,671,522$36,000$2,467,150
58$0$8,361,959$36,000$2,728,433
59$0$9,114,536$36,000$3,013,232
60$0$9,934,844$36,000$3,323,663
61$0$10,828,980$36,000$3,662,033
62$0$11,803,588$36,000$4,030,856
63$0$12,865,911$36,000$4,432,873
64$0$14,023,843$36,000$4,871,071
65$0$15,285,989$36,000$5,348,708



Disclaimer: This hypothetical example is for education purposes. Values are for illustrative purposes only and do not reflect the performance of any particular investment. Your own returns may be greater or less than this hypothetical example. Actual rates of return for the period shown will vary over time.