Figure 1 shows the results of saving over a period of twenty-five years, using an 8% annual after-tax rate of return. Under the three plans illustrated, only the amounts saved per month differ.



It's hard to see exact amounts on the chart, but after 25 years, $150 per months saved would grow to $142,654; $250 per month would grow to $237,757; and $500 per month would reach a level of $475,513. You can also trace the results of each hypothetical savings alternative for shorter periods, using the period in years, indicated along the bottom axis of the chart.

Of course, the ending amounts would be greater, given either longer periods of saving, or higher after-tax yields, or both. In fact, the differences can be dramatic.

Figure 2 shows the growth of $250, invested monthly, at three different after-tax rates of return.



After 25 years, you would have $237,757, assuming an 8% after-tax yield, $331,708 at 10%, and $469,712 at 12%. Clearly, a relatively small difference in the rate of return can have a significant impact on investment results in the long term. Therefore, it is important to get the best rate of return possible, given the amount of risk you are willing to assume.

What conclusions can we draw from this brief discussion and analysis? First, the benefits of saving are substantial. Second, even modest savings can add up to significant amounts, especially over the long term. In the parable of the tortoise and the hare, persistence and discipline have their reward. In savings, the reward is the accumulation of wealth. "Home runs" and luck aren't necessary.