The Pitfalls of Starting Your Savings Late

This post is written to help some of my clients who is in a dilemma of whether they should start their savings as soon as they can, or to wait till they are married and settled down before starting.

The answer is obviously to start early. We have heard it so many times but why is starting early so important, and what are the pitfalls if we start late?


A dollar today is not worth the same dollar in 10 years' time. This is because of opportunity cost lost through the interest that was not earned, and time is really money. Let's use a story to illustrate the point of 'Time Value of Money'.

Mary and John are both 25 years old and are unmarried, and they intend to save and invest $500 per month and to use the savings for to fulfill their financial goals (pay for their children's tertiary education, fund their retirement, start a business, etc) in 30 years' time.

Mary starts saving from now, and saves for 15 years, and stops saving from then on, due to higher living costs as she would most probably have started a family then.  (i.e. Mary save from Year 1 to 15)

John prefers to 'enjoy' his life now and only intend to start saving 15 years later, when he is more financially 'stable'.  (i.e. John save from Year 16 to 30)

This is how their savings and investment will be like after 30 years. (Assume return of 5%).

Investment Value at the End of 30 Years

John - $135,945
Mary - $282, 620

Difference - $149,675

As you can see, even though both of them save for 15 years, Mary gets back MORE THAN DOUBLE of what John returned!

This is because John has wasted 15 years of compounding interest growth. For Mary, even though she has stopped investing at year 16, her accumulated investments has been so substantial that it continues to earn interest that is higher than what John is earning! (Money breeds money!)


It is a misconception that one will have more free cash when they are older.

When one is in the 20s, they don't have much financial commitments. This is the best time to start saving.

Once one reaches his/her 30s, marriage and children come into the picture. There is also a high possibility that a house purchase is necessary.

Once reaching the 40s, the children would have grown up and money have to be set aside for their tertiary education, which costs a bomb nowadays.

Hitting the 50s, one worries about job security as their company may retrench them in favor of younger, more energetic youths who cost half the salary to employ.

Reaching the 60s, retirement becomes imminent and in a city like Singapore, retirement easily cost at least half a million dollars!

So am I right in dispelling the myth that one will be more financially stable when they're older? So the best time to start saving is always today!


Most of the people I met has more CPF savings than cash savings. Why is this so, especially when CPF is only about 20% of one's income? This is because CPF is a forced way of saving. Without this forced savings, many Singaporeans would not even be able to afford their HDB flats.

In an economy where commercialism is all around us, trying to get us to spend every single dollar we have on them, it requires discipline to be able to save and invest. When expenses are not kept in check, it will usually rise to the level of one's income.

Therefore the simplest way to save is to take a portion of your income and put it somewhere that you can't see. A separate savings account, an endowment policy, a regular investment plan, etc. The gist is "out of sight, out of mind".

It would be the best to implement a 80-20 rule when one is in the 20s and 30s, where one's financial commitment is low. The 80-20 rule means setting aside 20% of your income to savings that can only be invested, and never ever spent. Think of it as a golden goose, where you keep feeding it until it is fat enough to lay lots of golden eggs. This is a habit cultivated over time, and with practice, it becomes second nature.

If one can't save $400 out of a $2,000 income (20%), he/she will never be able to save $4,000 out of a $20,000 income.