Let’s start with something that everybody knows in theory - but is always good to hear again.
What is basically the difference in return you can get by starting to invest early in life and getting a compound return for longer vs starting to invest later in life.
Below is a simple example of two individuals that want to have approximately £65,000 by the age of 60, one starts to invest at 21 the other starts at the age of 36.
The table speaks for itself and is an indication of a simple mathematical truth, the power of compound return.
| 15 Year Investment Period | Yearly investment at 5% return | Profit | Amount invested to achieve that return |
| 21-35 Years | £1,000 | £64,777 | £15,000 |
| 36-51 Years | £3,000 | £65,007 | £45,000 |
To reach the same pot, the person starting to invest at 36 has to invest THREE times more than the individual starting at 21.
I knew this very basic mathematical principle myself, I studied economics at college and my dad told me so all the time, but I still did nothing. When I look around me many others are in the same boat. It’s not only about knowing what you should do but actually being able to do something about it.
My problem actually wasn’t achieving the actual return but rather putting money aside.
At the age of 32 I am nearing into the second group of people. This group of people have very little savings by the time they reach their early 30s and regret not doing something earlier.
I discussed my dreadful state of savings with my then friend and now co-founder Alex. He was in the same situation. We decided to design an experiment to find out how we could best put money aside.
I would save at the end of the month whatever was left before my next paycheck. Alex, however, who is a “techie” would download his transactions from his bank statement to his computer, run an algorithm on this data to figure out how much he normally had been spending and how much he could effectively be saving.
The other smart thing he would do is that he would do this process every three days as the month evolved and depending on how his month was progressing move a small amount of money to savings every three days. The result after a few months was amazing, Alex had saved almost double what I had saved!
We realised we had discovered something. Saving small regular amounts throughout the month added up to something a lot more substantial than saving one big chunk once a month, assuming you remembered to do so!
We decided to build Plum on that basis. However, we also looked a little deeper as to why we weren’t saving so far:
1. Thinking of saving made us worry so we just ignored it. We would have to build the product so that the user didn’t even have to think about it.
