My mother gave me a lot of great advice when I was growing up, but she wasn’t a money person. Sure, she worked hard and we made ends meet as a family, but finance wasn’t her forte. So when it came to talking about investment in our household, it was mostly related to things like shopping –“Those shoes are classic – think of them as an investment piece.”
Great advice for learning how to treat myself and shop wisely – not so good from a savings and investment perspective.
If there is one piece of advice I wish someone had given me when I was young, it would have been to start saving for retirement right then and there. The argument for saving early is hugely compelling, especially when you crunch the numbers. The earlier you start to save, the less you actually have to put aside over time.
Let’s take a simple example: had I started putting aside money at 21, I could have saved $2,000 a year for just eight years ($18,000) and had nearly $400,000 in savings by the time I was 65 (assuming a pre-tax return of 8%).
Contrast that with the age I actually started saving, 30: to save $400,000, I would have had to invest four times as much – nearly $70,000 over 35 years (versus eight years at 21). I’m still working at it!
If someone had shown me those numbers back when I was in my early 20s, I would have started socking it away. At least, I’d like to think so. At that age, I thought only rich, old people invested their money – I never thought I had enough. But time is on your side when you’re young, so even saving just a hundred dollars a month can get you that much further ahead. Plus, it builds good savings habits for later on.
So some advice to you younger readers (that I wish I’d had!) – start saving for retirement early! It’s worth it.