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Investment Math - Savings

As a sequel to our piece on compounding, let us talk about savings. It also seems to be an opportune time given RRSP contribution deadline is approaching soon.

"The best time to plant a tree was twenty years ago; the second best time is now"

-Chinese Proverb

Below, we present two different savers – George and Jake. We assume that both of them were able to compound their savings at 10% per year.
This is not very intuitive but the math checks out due to the miracle of compounding. As a late saver, Jake has had to contribute much more to his account and, even then, he has not been able match George. Jack was able to grow his wealth to $255,795 while George accumulated $290,113 even as he contributed a little more than 1/3rd of Jake's total contribution.

Be like George!



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