The Sooner You Start, the Better Off You Will Be

Now here’s a universal truth that’s often supported by those ubiquitous surveys released by financial institutions: the sooner you start to save and invest, the better off you will be.

One recent bank survey, for example, polled aging baby boomers to glean nuggets of financial advice they could pass on to youngsters in their teens and 20s. Understand that the typical baby boomer in the 1960s or 1970s gave no thought whatsoever to retirement or saving money, let alone investing it. So as a result, when asked in polls about their biggest regrets, the one that comes up over and over again is, “I wish I started to save money when I was younger.”

From what I’ve heard anecdotally, today’s young people are far more attuned to the message of putting aside money for the future. I’m not sure why this is: it may have to do with the fact that personal finance has become a mainstream topic in the media, starting perhaps with the financial crisis. The growth of blogging and financial blogs (there was a recent conference in Toronto on this precise topic) coupled with social media also seems to have contributed to greater financial literacy on the part of the young.

It’s encouraging then that the similar universal truth of the time value of money is being embraced. It relates to the power of compound interest, described as the “eighth wonder of the world.”

The fact you can put $5,000 a year into a tax-free savings account at age 18 should be reason enough to get started at such a tender age, even if your parents help (suggest they match every dollar you put in, so you’d only need $2,500 a year to max out in the early year). Over a 40-year time horizon, it’s quite conceivable that when soundly invested in broad equity exchange-traded funds and repeated annual contributions, such plans would grow to more than a million dollars.

I might add that this universal truth applies to more than just saving and investing. If you’ve landed your first job, you should enter the company pension plan the moment it’s offered: typically in three months; similarly, you should enter the group registered retirement savings plan or any offers of stock purchase plans. In all these cases, the fact your employer may be matching a portion of your contributions just makes the power of compounding all the more powerful.

The principle also applies to home ownership, which I continue to believe to be the foundation of financial independence. If you begin your career while renting, the years tend to fly by with the chance to build equity flying with them. The moment you have a secure job and a down payment, get your first step on the housing ladder.

If you have not begun any of these things early, fret not. The second best time to begin saving, pensions or home ownership is NOW!

Jonathan Chevreau is the editor of MoneySense magazine and author of Findependence Day, available at

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