… and thereby missing out on the power of compounding
Sanjib Saha
27 April 2025
Many of us work hard, live within our means, and make a conscious effort to save money. That’s an admirable habit—and an essential first step toward financial security. Sadly, there’s a common mistake that even the most disciplined savers often make: they stop at saving and never make the leap to investing.
Wealth building is a three-legged stool – Earn, Save and Invest. Without the third leg these diligent savers fail to benefit from the tremendous power of compounding growth.
At first glance, this doesn’t seem like much of a problem. After all, saving is responsible. It shows foresight and discipline. They’re funding their future financial goals dollar by dollar. Perhaps they are earning a decent interest from the savings account. But if these goals are many years away, they are missing the opportunity to grow their savings exponentially. Without growth, their savings will barely keep up with inflation, let alone increase their value by a significant amount.
How much are they missing out? That depends on how long the money has been invested and the rate of return. For example, if Adam is saving $100 per month towards his retirement and investing it for growth – say with a reasonable 8% annualized return, he’ll have over $140,000 dollars in his retirement account in 30 years, as if he had been saving $400 per month, not $100. Doing so for 40 years is equivalent to $675 per month. Such is the power of compounding growth. Over a long enough time horizon, even a slight difference in annual return makes a huge difference in the outcome.
Why don’t they invest? The reasons vary, but a common reason is lack of awareness about the effective ways to invest money for the long-term. I used to be one of them who thought savings accounts and Certificates of Deposits are the ways to go for long-term investments. Luckily, I realized my mistake before it was too late and was able to course-correct.
Another common reason is procrastination. It’s easy to put things off indefinitely and eventually simply forget about it, especially if someone has a hectic career or other demanding responsibilities. But frankly, it doesn’t take much time to get on an auto-pilot mode, and it’s time well spent.
And finally, there are those have many misconceptions about investing for growth – it’s akin to gambling, it’s complicated, it’s for the wealthy, and so on. Making some effort to get basic financial and investment education would go a long way for this group.
Some people think investing is too risky or only for the wealthy. Others find the stock market intimidating or believe they need to “time the market” perfectly. And then there are those who simply never learned the difference between saving and investing, so they assume saving is good enough.
But the truth is, not investing is also a form of risk—the risk of falling short of your long-term goals, whether it’s retirement, a child’s education, or financial independence.
From Saver to Investor
The good news? Transitioning from saver to investor doesn’t have to be complicated. You don’t need to pick individual stocks or have a background in finance. Start with low-cost index funds or target-date funds. Automate your investments. Think long-term. And most importantly, start now—because time in the market matters more than timing the market.
Saving is smart. But stopping there is like planting seeds and never watering them. If you’re someone who has done the hard work of building up your savings, don’t let that effort go to waste. Put your money to work. Let it grow. That’s how wealth is built—not just through earning, but through smart, steady investing.
This article is part of the Big Mistakes series