Financial Education

Financial Wellbeing

Twin Paradox - Invest Early

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<p style="text-align: justify;">Let's see the case of two examples to understand the need for early investment in life.&nbsp;</p>
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<td style="height: 18.75px;">Starting Year : 2016</td>
<td style="height: 18.75px;">Starting Year : 2028</td>
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<td style="height: 18.75px;">Starting Age : 24</td>
<td style="height: 18.75px;">Starting Age : 36</td>
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<td style="height: 18.75px;">Investment Amount : Rs 20000 per year</td>
<td style="height: 18.75px;">Investment Amount : Rs 40000 per year</td>
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<td>Investment for : 24 years till age of 48 (2040)</td>
<td>Investment for : 24 years till age of 60 (2052)</td>
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<td>Retirement at 60 years of age (2052)</td>
<td>Retirement at 60 years of age (2052)</td>
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<td>Investment return : 12%</td>
<td>Investment return : 12%</td>
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<p>Both Arun and Ankit invest for same 24 years. Ankit invests twice the amount as compared to Arun. Who is likely to have more money for retirement?</p>
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<td style="height: 205.85px;">Arun</td>
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<li>Rs 1000 invested every year for 24 years @ 12% will become INR 118155<br>(from compounding chart)</li>
<li>Rs 20000 invested will become : Rs 2363100</li>
<li>This amount of Rs 2363100 is invested for 12 more years @ 12%</li>
<li>Rule of 72: If interest rate is 12%, Investment will double in 6 years.</li>
<li>Hence in 12 years investment will become 4 times</li>
<li>Value of Arun&rsquo;s investment at Age 60<br>= 4 X 2363100<br>= Rs 9452400</li>
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<td style="height: 18.75px;">Ankit</td>
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<li>1000 invested every year for 24 years @ 12% will become Rs 118155 (from compounding chart)</li>
<li>40000 invested will become : Rs 4726200</li>
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<p>Inspite of Investing double the amount, Ankit will have only half the amount of what Arun will accumulate</p>
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