The answer to this question is always now, no matter what your age and stage in life. One of the keys to a successful retirement is to start saving as early as possible. That’s because time is one of the most powerful tools in your investment toolkit.

Take advantage of the power of compounding

Compounding is where you generate earnings from your investments, and then earn more money as you reinvest those earnings. At first, compounding may seem to have little effect on your wealth. But over time, it has a powerful multiplying effect.

For example, let’s consider two people who start investing at different ages.

• Jayla starts early and saves $50 every two weeks from the age of 25 until her retirement at age 65.

• Mateo starts setting aside $100 every two weeks at age 40 and continues until his retirement at age 65. They both earn 4% per year on their money.

As the figure below shows, time clearly matters. Although Mateo invested more overall, he accumulated less than Jayla.

The above example is used only to illustrate the effects of compounding and is not intended to reflect future values of any mutual fund or returns on investment in any mutual fund. Account value in this example assumes a 4% annual return. Source: RBC Global Asset Management Inc.

Your monthly savings can really add up

As the chart below shows, it’s best to start saving as early as you can. The earlier you start, the less you need to contribute monthly to reach your retirement goals.

^{[Chart note: The above example is used only to illustrate the effects of compounding and is not intended to reflect future values of any mutual fund or returns on investment in any mutual fund. Account value in this example assumes a 4% annual return. Source: RBC Global Asset Management Inc.]}

For a real-world example, check out our Investment Performance Snapshot and see the impact monthly contributions and reinvested distributions would have historically had on a portfolio’s growth.

How do you get started?

1.     Set up a pre-authorized savings plan

This is easy to do and makes saving automatic and effortless. You can start with as little as $25 a month. That may not seem like a lot, but you’ll be amazed how small contributions can add up and grow over time.

2.     Give yourself a “retirement raise”

Whenever you get a bump in pay, reward your future self by increasing the amount that you regularly add to your retirement accounts. Over time, the difference can really add up.

It’s never too late to start investing

It’s tempting to postpone saving for retirement for another day – especially if you’re still early in your working years. There always seems to be another competing demand for your money. But whether retirement is in the distant future or around the corner, start saving as early as possible. You’ll build a habit for saving and take advantage of the time you have left to grow your nest egg.

Age is nothing but a number

The fact is we all need to save, whether for retirement or for an emergency fund. The only difference between a 25-year-old and a 55-year-old is that the 55-year-old who is just starting to save for the future has to make up for lost time. If you’ve held off on investing for any reason, the important thing is you’re considering it now.

Start to make up for lost time by:

• saving larger amounts

• changing your approach to saving and investing

If you delayed saving and are trying to catch up, you may be able to make up for lost time by saving more now. Someone who has been saving since they started working may have a head start, but saving larger amounts now can certainly help to bridge that gap.

It’s good to start with a budget and to look at other ways to build your savings. For example, a pre-authorized savings plan will allow you to automatically save smaller amounts each month. That’s easier for most people than having to come up with a large lump sum amount to invest. 

A financial advisor can help you develop a plan and put it into action. For some inspiration, check out this table below to see how your monthly savings could grow.

Monthly contribution

Assumes a 5% Annualized rate of return. Source: RBC Global Asset Management Inc. The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the mutual fund or returns on investment in the mutual fund.

Of course, saving large amounts of money isn’t always easy. That’s why it helps to make your monthly contributions automatic. In effect, you pay yourself first – before you think about spending it. Many people find they don’t miss the money because it goes right from their paycheck into their investment account.

Adjusting your approach

Are you an investor who could consider taking on more risk in the hopes of achieving greater growth over time? If yes, changing your investment approach could help you boost your savings.  Work with a professional to ensure any changes are right for you. Everyone has a different tolerance for risk and different personal circumstances.

For example, an advisor could recommend investing your savings in mostly equity-based mutual funds. While these types of funds tend to post stronger gains than other investment options over the long term, they are also likely to expose you to more risk – meaning you may see the value of your investments shift more often as markets move up and down.

Ask yourself:

• Can I live with this bumpier ride in the markets in the hopes of greater potential returns?

• Will I lose sleep over my money if markets get choppy?

• Do I have time to ride out any short-term dips in the market, or will I need my money in the next 3-5 years?

Discussing your short- and long-term savings needs with an advisor can help you get the answers you need.

Take action today

Whether you’re in your 30s, 40s, 50s or beyond, the best time to start investing is now. What step can you take today to get your savings journey? Your financial future awaits.

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