Example
Have a look at the following example:
- Jane invests R500 each month from the age of 18. At age 28, after ten years, she decides to stop. She has invested a total of R60 000. Jane leaves this amount alone for the next 47 years, until she turns 65.
- Jenny, who is Jane’s best friend and the same age, also invests R500 a month, but she only starts at age 28. Jane carries on investing this monthly amount for 37 years, when she turns 65. In total, she invests R222 000.
Which of the two friends will have more when she retires?
| Amount invested | Time spent contributing | Time spent invested | Projected benefit at retirement | |
| Jane | R60 000 | 10 | 47 | R1 050 000 |
| Jenny | R222 000 | 37 | 37 | R998 000 |
Even though Jenny contributed almost four times more, she still has far less money at retirement. This is because Jenny’s money earned compound interest for ten years less than Jane’s did. Isn’t the power of time and patience incredible?