A Tale of Two Savers: Lucie and Charles

by Jeff C. Johnson

"A Tale of Two Cities": Dr Manette and Lucie with Charles Darnay

This story is an example of the value of investing before age 30. I don’t know a couple named Lucie and Charles (they, of course, lived during the French Revolution), but the math behind the numbers is reasonable and could represent the accumulation potential of a savings and investment plan today:

Lucie is an industrious woman who, at age 20, begins saving $5,000 per year from her earnings and does so for 10 years, accumulating $50,000 plus an additional $22,432 investment return (assuming an 8 percent average annual return; reasonable, but not guaranteed!). At the end of her wealth-building 20s, she leaves the workforce, marries Charles, and becomes a full-time mom and homemaker. Her account value is $72,432. She never adds a new contribution or withdraws from the account, and it grows at 8 percent per year.

At this time, husband Charles, also age 30, has just finished graduate school. He begins working and saving $5,000 per year and does so for the next 40 years, earning an identical 8 percent return.

Fast-forward: Charles is 70 and has saved $200,000 during that 40-year period. With investment returns of 8 percent per annum, he has $1,295,282 in his account! This is a remarkable example of the compounding of money by a saver/investor.

But what happened to Lucie’s investments?

Having accumulated $72,432 by age 30, she never made additional investments, but left it to grow at the identical 8 percent that Charles was earning during his accumulation period. The result? A portfolio valued at $1,573,568!

To be clear, Lucie invested $50,000 from earnings before age 30; Charles invested $200,000 from earnings after age 30. Lucie’s account value is $278,000 greater than Charles’s.

Together, the couple has $2,868,850 of wealth accumulated, of which Lucie’s portion is more than half of the total.

The lesson: The opportunity to save and invest before age 30 should not to be ignored.