Although retirement may be many moons away for most of us, it's never too early to start planning for it. Take for example, the story of two mythical creatures named Emily and Dave.
If Emily puts $200 per month into a retirement account with an estimated 6% rate of return starting at 25, she will have contributed $96,000 in total, by the time she's 65. If Dave starts saving the same amount per month for the same amount of time at the age of 35, he's only contributed $72,000. Emily has contributed more cheese than Dave. Common sense, right?
That's where a magical thing call compound interest comes into play and changes everything.
Although Emily only put in 33% more money into her account than Dave, when it's time to retire she'll have $402,492 in her account, while Dave will only have $203,118, a 50% gap between the two. So, while Emily spends her retirement sipping Negronis in Seychelles, Dave will likely be watching pay-per-view at a Ramada Inn. Just something to think about when you get your next bonus, that's all. (Business Insider)