I was working with a client, trying to establish their goals, and ultimately set our sights on something measurable (a.k.a. “your number”).

Hold up Darren – I don’t have a number!?!

That’s another matter, but let’s pretend your number is $1,000,000. It turns out many people like that number.

How much do we need to save so that your capital has time to compound all the way to $1,000,000?

Hold up Darren – compound??

Think of it this way. You invest $100,000 on January 1, 2021

  • By Dec 31, 2021, it is now worth $110,000 because your $100,000 grew by 10% ($10,000 more for you than you started with).
  • In year two, this new amount ($110,000) grows by 5%, leaving you with $115,500 (meaning $5,500 of growth).

See what happened there?

Your initial $100,000 spawned a Mini-Me of $10,000 in year 1. And in year two, your initial $100,000 spawned another Mini-Me of $5,000 but…! your year-one Mini-Me of $10,000 spawned its own Mini-Me of $500. Or stated otherwise, the first-year growth of $10,000 was compounded. Now visualize this happening for 30 years.

Good! We are now armed with an understanding of compound growth. So what?

Below I will share a few graphs I worked on with a client during a recent meeting. I doodled on them. They aren’t pretty, my handwriting is atrocious at the best of times, and I wrote with my mouse. But follow along.


The Setting

Given that you are likely a long-term investor, there is a lot of compounding in your future. And the more years you let your money spawn Mini-Me’s, the richer you will be.
Let’s say you want to reach $1,000,000 of liquid assets in 30 years from now. But you hate the idea of saving, because it’s not nearly as much fun to save as it is to take nice trips to Europe.

Scenario 1: Save Early

You check your budget and figure you can sock away about $20,000/year. And you’re really committed… you do it for 10 years and then decide you’d rather focus on bigger trips. Assuming you hit 7% every year (this is not realistically going to happen… but humour me) you will hit your target of $1,000,000 in about 30 years.

Scenario 1 Save Early


Key takeaways from scenario 1

  • You save for only 10 of the 30 years (follow dotted line, which flatlines at $200K of total savings at year 10).
  • You put aside $200,000 to get $1,000,000 (follow solid line).

Not bad!


Scenario 2: Save Later (YOLO)

Now what happens if you say, “Darren, I’m living my best life now and I’ll save later”. Ok fine. Let’s assume you don’t save for the first 10 years and then you find out, talking to me, that you will need to set aside around $26,000/year for the next 20 years to hit that million dollar target. Assume same rates of return as the first scenario.

Scenario 2 YOLO


Key takeaways from scenario 2

  • You still managed to hit your target of $1,000,000 (solid yellow line) – nice!
  • But you had to save $320,000 more versus scenario 1 (shaded area between yellow dotted line and orange dotted line).
  • You had to make more than double the sacrifices for the same outcome!

Let that sink in.


Scenario 3: Save More, Save Early (a.k.a. What Would Darren Do?)

I’m all about getting the maximum outcome for each unit of effort I put in. In that spirit, what happens if we:

  • Make the same sacrifices as we do in scenario 2 (socking away about $26,000/year for 20 years).
  • But we start doing that right now!
  • And of course, let’s stick with the same rate of return we’ve been using.

Scenario 3 Save More save early


Key takeaways from scenario 3

  • You save the same amount of money (notice the yellow and green dotted lines meet up).
  • But you now have more than $2,000,000 rather than $1,000,000!

No need to wonder which one I would sign up for. How about you??

Let’s Put It All Together!

This last graph will summarize all the 3 scenarios in one image. It looks a bit messy but refer to the graphs in scenarios 1 through 3 if you get lost.

Key takeaways from this graph

  • Do either scenario 1 (orange) or scenario 3 (green).
  • Scenario 2 (yellow) is just too much pain for the ultimate outcome.


Final Thoughts

Saving money is easier said than done; I get it, there are competing priorities and life throws us curveballs now and again. My aim here is not to be dogmatic. Rather, I want you to understand that compounding works best when done early. And by early, I mean now.

If you’re a doctor or a dentist, have your own clinic or practice – I know what you earn. You can do this.

Can’t quite put aside (what you consider to be) a meaningful amount of money? That’s an excuse. Put aside what you can in year 1 and aim to hit your target – at the very least approach it – in year two. Rinse and repeat in year 2 if you need to, until you hit your stride. I highlighted the word ‘your’ because investing objectives are personal; don’t compare yourself to others.

Remember, investing (and compound growth) is not a sprint, it’s a marathon. Just start running and, with proper coaching to motivate you, you can hit your target.

Teaser: in the next while I discuss a strategy or two to turbocharge your wealth accumulation, regardless of which scenario you’ve opted for.

– Darren

Note about the figures and graphs: These were quickly cobbled together during a meeting. In addition, life is not a spreadsheet; you should not expect such a smooth & linear outcome. They are approximate and are used to illustrate a point; they are not intended to guarantee an outcome.

As a strategic wealth advisor, I can help you gain peace of mind and achieve your dreams for the future through various wealth management strategies. Whether it’s a worry-free retirement, saving for your children’s education, fulfilling a lifelong ambition, running a prosperous business or leaving a legacy to your loved ones or a cherished cause, I can work with you every step of the way. Please feel free to reach out to me by completing our Meet With Us form.

*Note to the reader: This article was originally published on LinkedIn on February 15, 2021.

Darren-St-Georges, team of Strategic Wealth Advisors of The St-Georges Group

About the Author

Darren St-Georges is a Senior Wealth Advisor at Assante with over 15 years of experience in wealth management in Montreal. Assisted by a team of strategic wealth advisors, he has helped numerous clients, such as dentists, healthcare professionals and business owners, simplify complex financial issues and achieve their financial goals through proven wealth management strategies. Leveraging integrated wealth planning, Darren’s mission is to use his experience and skills to bring financial peace of mind to his clients. Contact Darren for expert wealth management advice.

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