When you were a little kid, was there an age where you were like “Man, that person is __? They’re definitely a real grown up. They understand taxes and know how to put on eyeliner.” For me there was, and that age was 25. I felt like 25 was the height of sophistication. You were old enough to live by yourself, drink, vote, have a job and a boyfriend…it was when your life really began.
What is An Adult Anyway?
Then, when I got to be in my twenties and the Great Recession left every other person I knew living with their parents after college or saddled with enough debt to ensure they’d name their first born Sallie Mae, I realized being grown up is totally relative. At least when it came to feeling like that adult I had always pictured.
However, do you know who still thinks that 25 is a pretty grown up age? Your good buddy compound interest. And compound interest says that you should start saving like an adult, even if you don’t feel like one. (I’m definitely still not sure how taxes work.)
The Power of Compound Interest
Compound interest is interest added to the amount of money you deposit. You earn interest on not only the initial deposit, but the interest as well. Double score!
Compound interest is one of the most beautiful things humans have ever created. And I say that having climbed the Eiffel Tower and sky dived over the Great Barrier Reef. Compound interest is always working for you, and the earlier you start letting it, the harder it works.
What I mean by that is that saving earlier is saving smarter. The earlier you put your money in a retirement account like an IRA or a 401K, the more time it has to grow and generate a very nice sized nest egg for when you get out of the work force.
The earlier you start saving, the more interest you’ll make. Remember, you don’t have to do anything to earn interest besides put money in the account. You don’t have to clean tables or enter data or coordinate schedules. It’s free money that does all the work for you!
Start Saving Now!
So whether you’re on the later half of your twenties or just getting into your second decade, start saving now! Find a high yield savings account and tuck away a part of each paycheck starting today. The earlier you start means the smaller the amount you put in can be.
Starting with $20 each paycheck is fine if you’re 21. That $20 goes to work right away, and as your paychecks increase, so too can your savings. If you’re 24-26, it should be more like $50 a paycheck. If you’re 27-30, put in as much as you can each month. While you’ll never be able to make up the time that’s already passed, you can always feel good about saving a large portion of each paycheck.
I like to think of saving now as gifting my future self. While I may be passing on that cocktail tonight, I am gifting myself a comfortable retirement at age 60. To me, that’s a pretty sweet deal.
Do you believe in the power of compound interest? Do you save for retirement regularly? Why or why not?
If you want to get a head start on saving while still enjoying what life has to offer, consider opening an account with Wherewithal. Your savings grow as you shop!