The Daily Telegraph cited Albert Einstein’s saying that compound interest was the eighth wonder of the world in some examples of saving for retirement.
It started with a 21-year-old who saved £2,500 a year until the age of 30. With a 7% annual return his pension pot at age 70 would be worth £553,000. Then it considered another saver who started saving £2,500 a year at age 31 and continued until age 70. At the same 7% growth rate, his fund would be worth just £534,000, even though he had paid in four times as much. Finally, if grandparents were to contribute £2,500 a year for just two years for a new-born, the child would have a fund worth a remarkable £551,000 at age 70. Clearly Einstein was right. As for most areas of financial planning, doing it in plenty of time is the key to success.