Let's say Alexa (25 years old) and Emily (35 years old) start saving at the same time. They each save $10K per year into an account earning 5% annual interest. When they retire at age 65, Alexa will have $1.3 million in savings, and Emily will only have $700K. By starting 10 years earlier, Alexa has almost double Emily's balance! $100K of the difference is from the ten extra years Alexa saved $10K. However, the remaining $500K is just the power of time. Emily missed out on ten years of compounding, costing her over half a million dollars.
I like to think about compound interest another way, too. Let's say you want to have $1 million when you retire. Using the same interest rate assumptions as above, if you start at age 25, you can achieve your goal by saving just over $650 per month. If you start at age 30, you need to save about $875 per month. At age 35, you have to save about $1,200 per month. Each year has a multiplier effect. If you wait longer, you'll have to save exponentially more to achieve your goals.
So, we've established that saving early is important. However, it takes time and effort to put away a portion of your paycheck every month. I'm all about finding ways to make my life more efficient. That is why I use Digit to help me save.