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?