Saving VS Investing For 30 Years: A Story

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An animated fictional case study of two colleagues with different financial attitudes. One saves his money, one is late to the game but invests it and he comes out on top by a long shot, enjoy the maths!

@IllustratedFinance

Transcript:
This is Ben & this is Tom
They're both 18
Equally qualified
& equally happy
They even both have the same job at the same company
Making $60,000 a year
There is but one difference
Ben was brought up in a family that taught him to save his money for retirement, so he's planning to set aside 10% of his income and put it in a savings account.
On the other hand, Tom is not interested in saving. Not unless he's saving for something specific, like a holiday or a new car.
They're chatting at work one day and things start getting a little competitive...
Ben, confident in his savings plan, bets Tom that he'll be a lot richer than him in 30 years time.
Tom boldly accepts the bet and they get back to work.
One year passes, and of course Ben has a nice $6,000 saved.
Tom's got nothing.
But he's not worried.
Tom's been a busy bee.
Throughout the year, he's been educating himself about finance, money, and how the system works.
After cancelling a few subscriptions and deciding to go out for dinner a lot less, he calculates that he can also afford to put away 10% of his income.
But it's not going in the bank.
Tom's going to start investing.
He's going to be buying small fractions, or shares, in the S&P 500
Let's fast forward 10 years and see how they're getting on...
It looks like Ben's saved up an entire year's salary! $60,000! Well done Ben!
What's just 9 years of investing done for Tom?
Woah, Tom's got $75,870! Even though he's been doing this for a year less!
Ben's got some catching up to do, but he does have some exciting news!
Ben's received a promotion, and from now on he'll be able to save $7,000 a year
Let's skip ahead 20 years this time and take a look at Ben's bank account...
Wow!Ben's got exactly $200,000 after 10 years of saving $6000 a year, and 20 years of saving $7,000.
How about Tom?
Tom's been investing his money for 29 years. His money has been compounding at a rate of 8% on average each year, but he's still putting that same old $6,000 in each year.
Tom's total balance at the end of all of this is $657,664!

@IllustratedFinance

Tags:
#illustratedfinance #finance #economics #savingmoney #savings #investing #invest #investment #wealth #money #financialeducation #didyouknow #interesting #education #edutainment

@IllustratedFinance

Thanks for watching!