How starting your 25-year SIP 5 years earlier can help you almost double your returns

Money making tips: If there is one good thing that has happened because of the coronavirus outbreak, it is that people have been reminded about the importance of savings and investments. People who had saved money over the years were in a lot better situation than others as the economy took a hit due to pandemic. It also highlights the importance of saving early. 

In fact, a simple calculation shows that even a delay of five years can cost you big, while you may stay in the scheme for a long period. Systematic Investment Plan or SIP, which is one of the most sought after investment modes, can help you earn Rs 68 lakh extra if it is started on time.  

Let’s assume that the investor is 25-year-old and is delaying the SIP for another five years. For calculation purposes, let’s fix the SIP amount at Rs 5000 per month. So, if the SIP is started at the age of 30 and goes on for 25 years, the eventual return – at 12 per cent average rate – will be Rs 8431033.  

By this time, the investor will be 55-year-old. The returns seem quite impressive, right?

Now, what if the investors start the SIP today. It will widen the investment period to 30 years, instead of 25. And, while the other factors remain the same, the return at the end of the tenure would stand at Rs 1,52,60,066.  

There is a massive gap of Rs 68 lakh or Rs 68,29,033, to be precise. And for this, you just need to start investing five years earlier. This is possible because of the power of compounding. You can also achieve the same by staying in the scheme for five additional years, i.e. till the age of 60.   

But then, by the time you reach retirement, you may have other investments to claim which could be enough to take care of expenses.