“Young people have more time to weather the ups and downs of the stock market.”

Question: What's the benefit of starting to save for retirement as soon as you can?

Carrie Schwab: Let me give you an example. And I don’t really have the numbers memorized, but you can get gist.

There is a pretty common example that you have twin sisters and they are both 25 years old.

One sister at 25 saves $2,000 a year for 10 years until she is 35 okay, and then she stops at 35. And she just let’s that $20,000 grow until she is 65.

While her twin sister did not save that whole 10 years, she starts when she is 35 years old, at the time when her other sister quit saving, and she saves $2,000 a year for the next 30 years until she is 65 years old, which she saves a total of $60,000.

You know who ends up with more money? Sister one, who only saved $20,000 compared to her sister who saved for 30 years a total of $60,000.

Sister one, who again only saved 10 years, almost has double the amount of money of the second sister who saved more, but waited longer, waited 10 years before she started saving, that is the power of compound growth.

Recorded on: March 27, 2008