A 25-year-old who saves Ksh3,000 every month for just 10 years could have more than Ksh7.4 million by age 60, even after stopping contributions at 35, a pension specialist has said.

🇰🇪 Breaking It Down

The projection assumes an average annual return of 10 per cent and shows the power of starting retirement savings early, with investment gains doing much of the work over time.

Alex Kirigo, a pension specialist, shared the example during this week's Co-op Bank Youth Forums on Friday, August 14, which focused on why young people should start planning for retirement early.

Kirigo said a person contributing Ksh3,000 monthly from age 25 to 35 would have contributed Ksh360,000.

📌 What You Need to Know

According to the projection, at age 35, the fund will be worth approximately Ksh614,535 due to compounding interest.

If left untouched for another 25 years, the fund could grow to about Ksh7.4 million by age 60, representing an investment gain of more than Ksh7 million.

Kirigo compared the effect of compounding to two friends planting mango trees, with one starting immediately and the other waiting for 10 years before planting.

"By the time it is 10 years, for the one who planted their tree early, it will have started fruiting. For the other one, maybe it is the time his mango tree is sprouting," Kirigo said.

He said the fruits and seeds produced by the first tree represented the returns generated by savings, which could themselves generate further returns over time. "You have planted one seed. And because of compounding, you have a forest," he said.

The example becomes even larger for someone who continues contributing Ksh3,000 every month from age 25 to 60.  Under the same 10 per cent return assumption, the fund could reach about Ksh11.4 million after total contributions of Ksh1.26 million.

📰 Source: Kenyans.co.ke