Whitney’s Dilemma
Compounding Interest Case Study
Whitney is 25 years old and a college graduate. She makes $48,000 working in online marketing. She has a 401(K) but wants to start a brokerage account. She would like to begin investing $150.00 per month right away, but is hesitant because she fears she will not have enough money to save for a down payment on a house and she does not want to alter her lifestyle. She wonders if starting to save now is worth it. Perhaps she should wait a few years before she starts investing. Whitney decides to crunch some numbers and decides to go to:
http://www.bankrate.com/calculators/savings/simple-savings-calculator.aspx .
Whitney has $5,000 set aside for an initial investment and decides she could put $150.00 per month in the brokerage account. She assumes she will earn a return of 6% on average per year compounded annually. Since she is not planning on touching this money, she plans to leave it in till she is 65.
The question she poses to herself: Is it best to start when I am 25 or wait till I am 35?
| Age Starts | Age Ends | Contributes How Many Years | Interest Rate | Compounded | Total Saved |
| Starts at 25 | 65 | 40 | 6% | Annually | |
| Starts at 35 | 65 | 30 | 6% | Annually | |
Whitney saved $____________________.00 more by starting today instead of waiting.
