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How saving early in your RRSP helps: Amy and Amanda's story

How saving early in your RRSP helps: Amy and Amanda's story

Amy and Amanda may be twins, but they are very different when it comes to saving for retirement. Here’s what they did:

Amy:
            Starts saving at age 20
            Puts $1,000 a year into her RRSP to age 34
            Total she saved: $15,000
 
Amanda:
            Starts saving at age 30
            Puts $1,000 a year into her RRSP to age 64
            Total she saved: $35,000
 
If both sisters made 6% yearly on their investments, before costs, what will they have by their 65th birthday?
 
            Amy: $141,700
            Amanda: $118,100 

Note that Amanda actually contributed $20,000 more than Amy, but Amy winds up ahead by more than $23,000 due to the magic of compounding interest. Clearly, starting to invest early can really pay off. If you wait even 10 years to start saving, you would have to save a lot more money, over many more years, to come out ahead.