Why wait till you’re 55 when you can perhaps retire at 35 to pursue your passion projects? The sooner you start saving, the earlier you could retire.
Starting the savings process early has its benefits by two magical words: compound interest. What is compound interest? It's interest that earns interest.
If you save RM10,000 and your bank gives you 3% per year in interest, you will have RM10,300 at the end of the year.
The next year, you will begin to earn interest on RM10,300, and at the end of that year, you will have RM10,609.
Now, imagine you add RM1,000 every month into the same account. At the end of 10 years, you would have amassed RM153,235. Without compound interest, you would only have RM130,000. This means that you earned RM23,235 just from compound interest.
It’s advisable to start saving in your 20s, so that you have more time to let compound interest do its work. Saving your money in the bank is not the only way you can let compound interest work for you. You can look at other investments such as unit trusts that may give you a higher interest rate. There are fun online tools that can help you plan your savings and investments such as Calculator.com.my or speak to a trusted adviser.