An annuity due involves saving or investing money by making payments at the start of each period, such as monthly or yearly, rather than at the end.

This approach benefits the investor because the money begins to earn interest immediately on the investment.

Meet Nick, who decided to invest one hundred dollars annually for three years at an interest rate of five percent per annum.

With an annuity due, each one-hundred-dollar payment earns interest right from the beginning of the year.

This means that Nick allows each payment more time to accumulate interest by choosing to invest at the beginning of each year.

By the end of the three years, the total amount accumulated will be much higher than it would have been with payments made at the end of each year.

Starting earlier provides a financial advantage. The earlier the money is invested, the more it can grow.

By investing earlier, Nick not only benefits from compounded interest on each annual payment but also sets a disciplined saving pattern, ensuring financial stability and growth.