The Opportunity Cost Of Early Saving: A Study On Delayed Financial Planning In India

Abstract

This research paper examines the opportunity cost of early saving by evaluating the financial outcomes of individuals who begin investing in their early 20s versus those who delay investing until their late 20s or early 30s. The study aims to quantify how compounding, market conditions, and inflation trends impact wealth accumulation over time. By conducting a comparative analysis across two asset classes—equities (NIFTY 50 ETF) and Gold ETFs, the research assesses the significance of early investing in enhancing investment efficiency, risk-adjusted returns, and long-term financial stability.

The study employs statistical hypothesis testing (Independent Samples t-Test) to analyze differences in Savings Efficiency Ratio (SER), Sharpe Ratio, and Compounded Annual Growth Rate (CAGR) between early and late savers. The findings reveal that while late investors appear to achieve higher nominal returns in recent years, this advantage is largely driven by market timing biases and inflationary distortions, which diminish real purchasing power. The study further highlights that early saving consistently results in superior investment efficiency, mitigating market volatility and compounding wealth more effectively over time.The research contributes to the broader discussion on financial planning and wealth management by reinforcing the importance of early investing as a long-term wealth-building strategy. The insights from this study emphasize the need for young individuals to adopt structured savings and disciplined investing habits at an early stage, ensuring greater financial security, inflation protection, and sustainable wealth accumulation over their lifetime.