Why Saving In Your 20s Is Easier Than Waiting

We’ve been over before why saving when you’re young is so beneficial, it gives your money a lot of time to double over and over. At an 8% rate of return (which is merely average over a long period of time), a $10,000 investment at age 25 will grow to be over $217,000 by age 65. That’s almost 22 times your initial investment! Saving while you’re in your 20s will yield incredible benefits, you just need to make sure you sock away as much as possible while you’re still young.

Those who wait until they are in their 40s or 50s to save are at a huge disadvantage. While it may take some rude awakening to realize you need to start saving, this advice is for all of you 20 somethings (or 30 somethings) who want to start off on the right foot.

There are a lot of excuses to not save (it’s very easy to convince ourselves to spend more and everyone gives into some amount of lifestyle inflation, but I think that saving while you’re young will not only teach good habits and make saving later easier, but there are several reasons why saving in your 20s is actually easier than waiting to save later on.

Why Saving Is Easier In Your 20s

When you exit college, you may have some student loans and your salary probably won’t be huge, but you have a big advantage over people in their 30s and 40s. You’re used to living like a college kid, so living with a roommate (or 3) is not that big of a deal and after living in dorms for a few years, even a small, cramped apartment will feel like a palace as long as there is air conditioning. Stay modest for a few years and you’ll be able to save quite a bit in just a few years.

When you exit college, what financial responsibilities do you have? Most of the responsibilities are the same (rent, food, alcohol), while transportation and some new work clothes are never a bad idea. But that doesn’t even compare to what you’ll be spending when you have a spouse or kids. You’re lucky to have so few financial responsibilities, so take advantage and save now!

Plus, there are tax advantages. When you’re young, you’re more likely to be under the Roth IRA income limit, so you’ve got even more incentive to save. It’s like getting an extra little boost when you start saving. And the earlier you start, the more years you’ll be able to take advantage of it!

The best way to save when you’re young is to make it automatic. If you make saving automatic, you won’t miss it. Have it transferred from your checking account the day you get paid and live off the rest. It will be natural and you definitely won’t miss it.

Readers, why else is it easier to save when you’re young?

9 Responses to Why Saving In Your 20s Is Easier Than Waiting

  1. The biggest advantage to starting the savings process early is that you’re setting good habits that will carry through the rest of your life. If you wait until you are in your 40s or 50s, not only do you have a lot of catching up to do, you are also going to have to break a lot of habits that have likely been in place for decades, making the challenge even more difficult.

  2. Jake Erickson says:

    These are all great reasons on why to start when you are young. I graduated college 2.5 years ago and I did exactly what you mentioned here. I lived the college lifestyle (low expenses) while I paid off my student loans and began saving for retirement. I haven’t saved a ton at this point, but I no longer have any debt and will be able to save a lot more. Avoiding lifestyle inflation can be the hardest, but most rewarding way to save money.

  3. Good post! I’ll agree with MB, that by starting early you begin to develop those good savings habits. Even if it’s in small amounts in the beginning it helps grow that discipline which will make it more natural to start saving more as you start to earn more.

  4. krantcents says:

    Most people do not realize that even saving a small amount in your 20s is worthwhile. Something as little as $150 per month will be significant in 40 years.

  5. Emily @ evolvingPF says:

    Totally agree with your comments and Money Beagle/John’s remarks! It’s easy to save because you’ve never not saved before. Personally I don’t make much money, but as soon as I got a full-time job I started saving 10% and have increased it since. I’m hoping that when I look back on that later in life I’ll tell myself “You saved THEN on THAT salary so you can do it now too!”

  6. Heather says:

    I’m so infuriated by posts like this. Sure, saving is supposed to be easier when you’re younger and have fewer responsibilities, but these days there are student loans to pay. I have $400/month in student loans. I’m saving as much as I can, but I’m only able to sock away $100-$300/month, and I’m not putting anything into a retirement plan at this point. Yeah, this plan is great if mommy and daddy fund your life until you’re 20, or if you have the significant advantage of being born to parents who teach financial lessons from a young age. Those of us who are learning from our mistakes don’t fall into this category.

    • @Heather, I don’t think you’re giving yourself enough credit. $300/month now is over $3,500/year. If you can do that for 5 years in your 20s, that comes out to over $250,000 by the time you’re 65. That’s pretty good, and anything you can save once you’re clear of the student loans in your 30s will help you reach your goals.

      I think you’re on the right track!

  7. Jeremy R says:

    I completely agree. If you make it a habit to save, then it becomes easier to do and it will be a habit that will remain with you for many years. Although people in their 20’s don’t have as much money to save, even a little bit at a time adds up to a large amount.

  8. Christine @ ThePursuitofGreen says:

    I was astounded when I learned about compound interest! It’s amazing how much benefit time has when it comes to retirement funds. Thanks for making it easy to understand.

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