Saving early matters

Don't underestimate the value of time. The longer you keep your money invested, the more time it has to add up and potentially grow.

Let's say you set aside $1,200 a year—that's just $100 a month—in a tax-free account such as a 529 college savings plan,* for a total investment of $21,600 over 18 years. If this investment earns 5% a year, you'll have about $35,400 at the end of 18 years.

But if you wait 9 years before you start saving, you'll have accumulated about $13,900, factoring in that same 5% return.

In other words, you'll only have earned about $3,000 in that 9-year span—as opposed to nearly $14,000 over 18 years!

That's the beauty of compounding—earning money on your investment and then earning money on those earnings. And over time, it only grows more powerful.

Starting to save earlier could mean you'll have more saved

This chart shows that a monthly contribution of $100 will compound more if you start saving earlier, giving the money more time to grow. If you save $100 a month for 18 years your ending balance could be $35,400. If you save $100 a month for 9 years your ending balance could be about $13,900.

These hypothetical examples don't represent the performance of any particular investment. The assumed 5% rate of return is for illustrative purposes only. Actual market returns will fluctuate annually and aren't guaranteed. The ending balance doesn't take into account any taxes or penalties that may be due upon distribution.