Saving for retirement when you are young

Being young in this economy, just paying monthly bills is stressful enough – can you afford to start saving for retirement?

In today’s economy, it is not uncommon for young people to live paycheck-to-paycheck.Scrambling every month to make rent and car payments, many find it hard to think forward 40 years about retiring, much less saving for retirement.

There is never an “easy” time to start saving, but it gets easier on you if you start early. Although understandable, putting off saving for retirement is one of the costliest money mistakes. Putting things in perspective, an average worker generally has 40 years to work and save to afford 20-30 years in retirement. So the longer you wait, the less time – and more pressure – you will have to accumulate what you will need to afford retirement when you finally do start saving. As you tell yourself “I’ll save later,” you are also missing out on the extra amount earnings from compound interest over the years (which can make a great difference, shown in the example from our last post).

Many understand the importance of saving early for retirement, but the big question still remains: How to find the money to put into savings?

Do you really need to buy a coffee everyday?

The answer lies in your personal spending habits. Aside from the necessary bills and expenses to pay, most people still have a little extra remaining. This extra amount usually goes to occasional dinners out, a daily coffee or soft drink, or new purchases that are not “must haves” (a new pair of shoes or another new gadget, for example). If you invest that money – say $100 per month – for 40 years, how much do you think you would have saved at the end of 40 years? Most would say $48,000. That would be true if you did not invest the money and interest. Not too shabby! But how much you would have if you did invest the money every month? Assuming an 8% rate of return, your monthly $100 deposits would grow to over $300,000!

Starting to save early can give you a terrific advantage when saving for retirement. Don’t wait – start now! (Hint: You can find useful tips to help you start from our saving and retirement planning posts!)

7 thoughts on “Saving for retirement when you are young

  1. Ever since I began working at 16, I have put 25% of my paycheck into savings. Attempting to “pay myself first” I put this money away before paying any bills or expenses. This has helped in building a good sized emergency fund. I feel comfortable that I will be able to afford an emergency bill if it comes up. What I have trouble taking action towards and what I feel is a problem for most students is putting this saving towards something that will accrue interest. There is always the worry that investments are not being made in the correct place and these savings will be wasted, but seeing the large difference between simple savings and those savings when they are invested definitely give incentive to learn more about potential opportunities.

  2. I agree with this article. You are never too young to start saving for retirement, or saving period. I think it wise to teach the next generation how to give, save, and spend. We do not know what the world holds for our next generation and we need to teach them that saving for your future is the best thing you can do for yourself. You are the only gaurantee you have.

  3. Saving for college is very important, this is a wonderful article. No one can stress this enough to college students especially, that when you take on that first job in your career look towards retirement. I am guilty of the daily soft drink or coffee spending and everyday I think about how I could save money. I own a coffee pot but for some reason I still buy coffee from the stores. The earlier you learn the better off you will be once you start to establish your family and your life. Many students are struggling now however if you save for retirement you will no longer have to struggle once you have finished your career, which should be a fear of many.

  4. This article was extremely informative being that I am still a young college student about to enter the real world. After reading the article, I completely agree that it is never too early to begin saving. The earlier you begin to save, the more your retirement fund can incur in the long run, and potentially make you rich when your old and retired. Planning for your future can alleviate a ton of stress off your back, so we should begin while we’re young and don’t have many responsibilities like we will once we have a family and will need the money.

  5. Even though I’m only 21, I have actually been saving for my retirement for a year now. The company I work for offers a 401-K to all employees, including part-timers. I’m happy to read that I have taken the step in the right direction towards saving so early, for I was a bit hesitant when my company first offered this option to me.

  6. I cannot wait to start saving for retirement. Like the article says, there’s never an easy time, but I think the best of the worst times is probably right out of college when you have your first job. Your income will have just increased dramatically, and hopefully you can increase your lifestyle and other expenses only modestly, that way you can save A LOT. As you get older, you may be making more money but the expenses are going to be harder to control – marriage, kids, etc. Personally I feel so much better with a really big savings dedication so there’s no worry at all in the future.

  7. Being a young college student, this article definitely has helped me become aware of how important it is to save up for my retirement. I agree with how the article states that it is never to early to start saving up. The rate of return makes a huge difference on how much the amount of money in my savings will be. It is important that all young adults start saving up for retirement no matter how “young” you may think you are. Planning for the future will be beneficial and less stressful later on.

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