Contribute early, contribute your maximum

Two people both contribute $45,000 to their RRSP. The first person begins contributing $1,500 a year at age 25 and continues to do so for 30 years. The other begins contributing $3,000 a year at age 40 and continues making contributions for 15 years.

As you see, the first RRSP contributor will have accumulated a great deal more at age 55 than the second.

Contributor	Annual contribution	Total investment	Value at age 55
Number 1	$1,500/year - from age 25 to 55	$45,000	$141,691
Number 2	$3,000/year - from age 40 to 55	$45,000	$75,387

Our example is based on an 7% on a diversified portfolio.

RRSPs are easy to understand: they put time on your side. Your savings grow tax-free, which improves your return. The longer your money stays in this tax shelter, the more you'll have at your retirement. This is why you should start contributing to your RRSP early in life.

It is not always easy for graduates new to the job market or for young families to put money aside for their retirement, when it is still years away. However, it is very important to start contributing early and to contribute your maximum, regardless of how much your actual contribution is. If you contribute early in the year, you will earn more. Always remember: time is your best ally!