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Saving for retirement – aren’t I too young for that?

Saving for retirement – aren’t I too young for that?

September 14, 2020

Your 20s – the decade of your life that can be wildly confusing and transformative. Some of your friends are buying houses, building their careers, having babies or getting married. Others are on a different path; they’re still figuring out what they want to do with their lives and who they want to be.

It’s easy to brush off saving for retirement as something you’re too young for, something you don’t need to bother with until you’re really an adult.

Newsflash: you are an adult and saving is necessary.

By the time you’re thirty, you’re already late to the game.

You may be thinking, “Wait… what? How could I be late to the game when I haven’t even figured out what my career path is yet?”

If you neglect to start saving young, you're throwing away one of the best tools you have: time. Dasarte Yarnway delves into this concept in his book, Young Money,: "The time value of money principle suggests that a dollar today is worth more than a dollar tomorrow because of its appreciation potential and compounding of interest when invested. And the longer your money is put to work, the greater harvest you will reap" (Yarnway, 4). Essentially, the more time your money has to work in an investment account, the better. 

Setting aside some of your income, however, doesn’t mean depriving yourself. Per Parks and Recreation, you can still “Treat Yo Self” while treating your future self – just avoid going overboard.

Just as saving nothing at all is ill advised, neither is scrimping and saving to the point of not enjoying your money (and your life). Saving shouldn’t and doesn’t have to be, painful.

A common saving strategy is to put aside any money you have left over at the end of the month. It’s also common for this strategy to fail because you might (aka most likely) not have any extra money you'd like to save at the end of the 30 days. Additionally, you have to decide to save every month. This method makes you very cognizant of saving and can feel as though you're giving something up. This element of psychology is why many companies use subscription billing. Your card gets charged every month and you barely notice - you've been paying for Disney+ 9 months after you finished The Mandalorian and that was the only reason you got an account!

Just as subscription billing works for streaming services and meal prep kits, it can also work for your savings.

An easy way is to set up an automatic draft from your checking account to your savings/investment/retirement account at the beginning of the month. These monthly contributions can be as small as $50 and once you’ve done the initial set up, you can pretty much forget about it. I doubt you’d even miss the money. If you’re saving $50 a month, that’s only a couple restaurant meals, a few nights at the bar, one manicure, or 1-2 impulse Amazon purchases. And unlike your forgotten subscription to Disney+, that money isn't gone forever.

We’ve all heard the adage “Work smarter, not harder”. Let the wonders of time do some of the heavy lifting for you by saving early. Putting aside money for retirement might seem like a sacrifice now but delaying saving can cause you to have to save much more aggressively to catch up and, as a result, sacrifice much more.

Be smart - get started now!

Yarnway, Dasarte. Young Money: 4 Proven Actions to Design Your Wealth While You Still Can. Berrett-Koehler Publishers, 2018.


The comments and/or opinions mentioned are those of the author, not those of Kestra Investment Services, LLC or Kestra Advisory Services, LLC. Kestra Investment Services, LLC and Kestra Advisory Services, LLC are not affiliated with any other entities listed This article is meant for educational purposes only.  It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions.  All investing involves risk, including the potential for loss.