Just how much Better is it to Start Saving Early?

This week I thought we’d talk about the benefit of saving today rather than saving tomorrow. Now I know everyone knows it’s better to start saving young. But I thought it might be an interesting experiment to see just how much of a benefit it is and how that benefit changes under a handful of different scenarios.


  • For all of them I’m assuming an average return of 7% per year. Compounded before the addition of that year’s contribution.
  • Rather than use Monte Carlo, I’m just doing a simple compounded return.
  • Outside of the catch-up calculations. Contributions are constant for each period. I started with $10,000 per year.
  • I chose 40 years as the maximum length on a whim. You could make an equally good argument for 50 years or 30 years.
  • Savings start from 0.
  • For the CoastFIRE comparisons, I run a simple compound calculation for the comparison set from
  • My loops were set up as such A[j]=A[j-1]*(1+r)+C. Where A[j] is the value of your portfolio at year j, r is the interest rate, and C is the yearly contribution. I then created a loop that iterated for each year.
  • As I’m using 7% to handle inflation, I’m also assuming the $10,000 is inflation adjusted.

As always. I am not a financial advisor and nothing within this post should be taken as financial advice. This was just an interesting experiment that occurred to me one day and I thought I could crunch some numbers to see what it looked like in the end.


Below are the individual returns for the test case with a constant $10,000 across all tested cases. This is just looking at how much each year with little to no savings costs you.

Obviously, having extra years of savings without compounding will give you more. I don’t think anything surprising comes out of this graph. This is what we all know when it comes to compounding.

I also thought it would be interesting to compare this against someone who has stopped saving after hitting a certain value. So I created a sort of CoastFire portfolio and considered that against the groups that have started saving from nothing at a later date.

I do know that as the years of savings approaches infinity eventually all of these catch up. I also want to note that I did shorten the period by about 10 years. This is meant to make it have the same “number of years” for the initial portfolio. Due to the way I set up my loops this also excludes the first 9 years from the simulation above. Which presumably would also cross above the value. I did find it interesting that a CoastFIRE portfolio only begins to outperform after about 11 years from when contributions start. I would have expected it to outperform in almost all cases due to the higher “starting” number.

You could make a great argument that this isn’t realistic. Very few people save any money when they’re younger, they just don’t save as much. Below here are some where for the first few years you save less than the early starter and then increase your contributions to catch back up. I was originally going to include some comparisons of saving a smaller amount initially and then ramping it up as time goes on. But the graphs look similar to those above.

These simulations could also be taken to what does it change if I save an additional C amount every year and how much that additional savings would provide after n number of years.

Benefits of an Early Start

While this is probably obvious the biggest thing this shows is that the earlier you start the more likely you are to reach your goals. If you need X number of dollars to retire at age Y and can only save C amount every year you can very easily see the minimum number of years it would take to reach that dollar amount assuming that you have average returns over that period.

It also shows that every dollar saved is more valuable for younger people. As always the choice I’m considering is it better to save a dollar now or to spend it on something. Crunching the numbers real quickly, each additional $1 saved today is worth just under $14 after inflation instead of increasing my savings by $1 next year, assuming a 40 year time horizon. A beer at the bar has run me about $5 last time I went, or about $70 towards retirement. However this begins to drop off rather quickly, looking just a decade ahead, I’m only losing $7 per dollar of savings deferred. This just gives you another tool to use when considering if an expense is worth it when the choice is to buy or not to buy.

Non-Financial Considerations

As always personal finance isn’t just about the money. There are some non-financial considerations to look at.

While it is better to save as much as you can the younger you are, that doesn’t mean you should make yourself miserable. Unless your goal is to have the biggest number at the time you shuffle off this mortal coil. Life is meant to be lived, just do it prudently. Enjoy the occasional beer, just not all the beers.

Maybe it’s your plan, you’re going to school or in an apprenticeship program for a trade and can only save so much before you can make that additional contribution. My simulations assumed that you had the ability to save C amount every year and were choosing not too, this may not be the case.

Wrapping up

The important thing I wanted to look at with this post was just how much it costs you to put off saving for any number of years. While it’s okay to make those catch-up contributions down the road. Just make sure you’ve considered how big they’ll be and you’ve planned to give up that cash down the road.

A good follow-up to this post would be looking at how each year of forgoing savings affects the amount you’d need to contribute each year to have the same value at the end. I briefly worked on some of the solutions for this, but in the time that I gave myself to complete this post I did not quite have it figured out, I’m thinking some form of brute force solution is going to be the best for me.

Comparing the standard save C amount every year to strategies that start at higher values but contribute less after a certain date or less during certain periods (say saving nothing from year 20-30 but start at CoastFIRE).

Another interesting follow-up would be to add some volatility to this simulation, although when making simulations like this I prefer to keep the focus on things that an individual can control. I can control, to some degree, how much I save. I cannot control the volatility of the stock market. There are definitely plenty of ways you can add to this initial set of simulations to make it more interesting.

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