Many of us have heard the saying, “Time is money”. But most of us just accepted it and have never really reflected on the meaning of the statement and its truthfulness. The statement “Time is money” can be explained using multiple scenarios in different contexts, but I will use a financial context in the reality of many lives to illustrate why it is indeed true.
When many people are young, they think they have a lot of time before they need to start saving towards an emergency fund, to purchase a home, and for their retirement. Most may start saving to purchase a car, but once they buy the car, saving is no longer on their agenda. Pretty soon they may meet their significant other and talks of marriage cause them to start saving again for their wedding. Then they get married, have children, and then saving to purchase a home become the couple’s main goal, and after a few years, they may own a home.
But with a mortgage and new expenses, money becomes tight and they seem to be always trying to make ends meet. And they tell themselves they will wait a bit longer to start saving for their retirement. As they enter mid life, their children go to college, and tuition and school expenses take a big bite out of their budget. Soon they join the majority of people approaching retirement with little to no savings. They know they must save, but now they say it’s too late, I don’t have much time.
But what if each spouse had made the commitment to put aside $10 per day or $300 a month when they were young, could that have made a significant difference in their financial situation?
Let’s examine the situation in each table below.
| Mr Save Younger Saves $10 per day and invest in a Mutual Fund | |
| Age saving starts | 25 |
| Average monthly contributions | $304 |
| Interest Rate | 8% |
| Retirement age | 65 |
| Total years saving | 40 |
| Total savings at retirement | $1,061,266.38 |
| Mr. Save Older Saves $10 per day and invest in a Mutual Fund | |
| Age saving starts | 40 |
| Average monthly contributions | $304 |
| Interest Rate | 8% |
| Retirement age | 65 |
| Total years saving | 25 |
| Total savings at retirement | $289,112.02 |
The difference in years saving for Mr. Save Younger and Mr. SaveOlder is: 40 – 25 = 15 years
The difference in savings for Mr. Save Younger and Mr. Save Older is:
$1,061,266.38 – $289,112.02 = $772,154.36
So 15 years cost Mr. Save Older more than three quarter million dollars.
Now supposed Mr. Save Older saved double the amount instead since he started late, what would be the difference?
| Mr Save Older Saves $20 per day and invest in a Mutual Fund | |
| Age saving starts | 40 |
| Average monthly contributions | $608 |
| Interest Rate | 8% |
| Retirement age | 65 |
| Total years saving | 25 |
| Total savings at retirement | $578,224.05 |
Now supposed Mr. Save Older had tripled the amount saved instead, would he beat Mr. Save Younger at retirement?
| Mr Save Older Saves $30 per day and invest in a Mutual Fund | |
| Age saving starts | 40 |
| Average monthly contributions | $912.50 |
| Interest Rate | 8% |
| Retirement age | 65 |
| Total years saving | 25 |
| Total savings at retirement | $867,811.57 |
Even when Mr. Save Older triples his contribution Mr. Save Younger still has more at retirement. And let’s look at the difference in contributions for both savers.
Total contribution (at $10 per day) for Mr. Save Younger to age 65 is: 3650 x 40 = $146,000
Total contribution (at $30 per day) for Mr. Save Older to age 65 is: 3650 x 3 x 25 = $273,750
As you have seen in the example above, “Time is indeed money!” and procrastination is the enemy of saving!
Time wasted cannot be recaptured even when you put in triple the efforts later, so use your time wisely to plan and realize your financial goals for the future!