The Importance of Saving Young

20 Feb

The Importance of Saving Young

I am sure you will agree, children don’t need help in spending money but saving is a completely different matter altogether! As I write this, I am one of ‘those’ individuals who didn’t pay attention to his Father when I was a child, what I mean is that I didn’t pay attention to his wise words of wisdom which were along the lines of “stop wasting your money son, you’ll regret it, better off saving that money son!” or “why don’t you put that money in the bank?”.

I was of the mind-set that saving wouldn’t achieve anything except thwart any attempt I had of buying the latest toy, pair of football boots or even a bulk load of sweets. And yes, I agree, I am referencing a very early point in my life but we will get to that later.

You see, through my mistakes, I have learnt more than most that it is crucial for us to advise tomorrow’s generation accordingly. Whether the generation in question is between 10-18, or 18+, the importance couldn’t be clearer especially in this current & somewhat unpredictable economy and world we live in. People that start investing when they are young are more likely to develop habits that will last a lifetime. If you don’t start saving for retirement today, then when will you? Tomorrow sounds like a reasonable plan, but then life decides to surprise you, typically more than once.

It took me until my late 20’s to fully comprehend the importance of actually saving and understanding that money will grow, perhaps not overnight by as much as I had hoped but grow none the less.

Whilst slightly taboo, most of us dream of being a millionaire when we are young, don’t we?

Whether young or super young, the youth of today are facing financial disadvantages like massive student loan debt and a struggling economy that’s left jobs scarce and wages diminished.

To their credit, millennials largely understand they have work to do when it comes to their finances: They’re entering the workforce at a financial disadvantage, but they recognise it’s their responsibility to plan for their futures. Many though, spend most of their income as they go along.

If you’ve just finished university and are about to start your first job, you’re probably not thinking too much about how you will fund your retirement.

£250 per month

If you’re 23 years old and deposit £3,000 per year (it may seem a lot but that’s only £250 each month!) in savings plan with an 8% average annual return, you will have saved £985,749 by the time you are 65 years old due to the power of compounding. If you make a few extra contributions, it’s clear that a £1 million goal is well within reach. Also keep in mind that this is mostly interest – your £3,000 contributions only add up to £126,000.

Fitness & Training

The simple truth is that the compounding of earnings in a retirement account creates the potential for an exponential increase in your retirement savings. And to harness the power of compounding to its full extent requires savings discipline, which is no different than exercise: It’s always better to do a little bit on a regular basis, rather than to postpone, hoping that a longer, more intense workout later on will get you back into shape.

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