FOR YOUNG earners, spending is more important than saving. A study of 2,000 professionals found that more than 90% don't start planning for retirement in the first five years of their careers. Even by the 10th year, less than 20% would have a retirement plan in place. The consequences of this delay are mind boggling. What one saves in the first few years of starting a career burgeons into a massive amount over the next 25-30 years even though the individual saves more in the later years as his income grows. If an investor starts an SIP of `5,000 in an equity fund that gives 12% returns, he will accumulate `1.77 crore in 30 years. But if he waits till 28 to start investing, his corpus will be smaller by `56 lakh. Even if he enhances his savings by 10% every year, what he puts away in the first 10 years will account for almost 24% of the total retirement corpus. The longer the delay, the smaller is the corpus.

Many young earners don't start investing because their income is low. This is a fallacy. For a young investor, the smallness of the investment is more than made up by the long time available for the money to grow. The magic of compounding ensures that even a small sum grows into a gargantuan amount over the long term. The investment can be scaled up as the income grows in the coming years.