My nephew turned 2 a couple of weeks ago. For his birthday, we went to a petting zoo out in West Auckland where he and his little friends fed goats, chickens and sheep. They seemed to enjoy it.

There was a little pile of gifts on a table; lego sets, toy cars etc. But one gift which made me laugh came from a family friend. He gifted him $50 in a Sharesies investment account. If only we all started so young!

From a certain point of view, that $50 is worth much more to my nephew, as by the time he can get to the money, it would have grown considerably. Maybe that small part of his savings sits there until he buys a car at 16. At this point, assuming an 8% return, it would have tripled to $150. Maybe he takes it out during university when it is more than $200. Or maybe he never touches it until he retires at 65, when it has grown to over $6,000!

It is hard to understate the difference an early start makes in investing. Take KiwiSaver as an example.

If you contribute enough each year, the government will put $521.43 in your account. If you started at age 18, this single government contribution would grow to $19,414 by the time you reached 65. The sum of all of these government contributions is $255,570.

But if you started just a year later, you would miss this $19,414, ending up with $236,156 instead. That's 7.5% less at retirement age for missing one year!

A similar issue comes from investors sitting in default funds, missing out on those important early years' returns. This is why we supported the change to default funds, to get these investors out of cash and into shares.

While the effect of compound interest is more profound over these long time periods, it doesn't mean it is insignificant for those approaching retirement age. With larger net worths and incomes, it is just as important to act quickly at this stage.

Imagine your goal was to save $50,000 each year for 10 years before you retired. Assuming a 5% return, you would contribute $500,000 and earn $128,894 in gains.

If you decided to just put it off for one year, you would have 9 years to save $500,000. Your contributions have gone up to $55,556 each year to catch up. But, despite the same contributions, your gains are now only $112,587. That one year cost you $16,308!

If you wanted the same final portfolio value as expected previously, you would need to contribute $57,035 each year instead. The longer you leave it, the more returns you must forego or make up for with contributions.

Above I've discussed hypotheticals for missing a year of contributions. But the difference due to missing just one day can be as stark. According to this article from CNBC, the best day for the S&P 500 over the last 20 years delivered an 11.6% return in 2008. Not far behind was a 9.4% day in 2020.

If you invested a lump sum, the impact of missing this day at the start or end of your investment timeframe has the same effect. Over time, the effect of missing this single day will only become more pronounced in dollar terms.

As this Dimensional video shows, the impact of missing these periods can have a huge impact on your investment outcome. Investment markets tend to climb in spurts, so putting off your contributions can cost you as much as trying to time the market. Which is why, when it comes to investing, the best time was yesterday. The next best time is today.

So if you're putting off your own financial goals, get stuck in sooner rather than later. Sort out your KiwiSaver too, as a few minutes of work may be worth tens of thousands down the line. And maybe consider as a gift for your younger family members an new investment account. It truly is a gift that keeps giving!