It can be tough to save when you’re young. A new job might not come with the best salary. You might have things like rent, car payments and student loans vying for what could already be meager financial resources. However, being able to squeeze out some extra cash to save for the future can be critical to the success of your eventual financial situation.
Starting good habits early on
As with many things, good money-saving techniques can eventually become habitual. Starting good money-saving traits early on may mean that you build better habits moving into your latter years.
Good savings habits can also lead to expanded saving habits. Things like tracking expenses, tracking income, reconciling financial statements, forecasting, budgeting, and planning are all items that could be built upon the good financial foundation formed by habits that begin when you’re young.
When you’re young, it might feel as thought the weight of the world is upon your shoulders, but just wait. If you think that the pressures of finding a job, buying a new car, paying rent, and covering student loan debt is stressful, you could be in for a shock when you find yourself combining finances through a marriage, buying a first home, or having a child or three.
You might not realize it at the time, but you could have far fewer financial responsibilities in your younger years. And while your income might not be what it is later in your career, it could still be easier to put money away with fewer non-discretionary expenses vying for your attention than once you have far more financial responsibilities knocking at your door.
Growth over time
Maybe the most critical aspect of starting to save when you’re young is the power of time. When you’re young, and should you have the additional income to put toward savings, it can prove critical to your financial future.
I have a great personal example of this. As a young man just starting out in the hotel business, I wasn’t making much money, yet I found a way to squeeze enough out of my paychecks to contribute five, and eventually ten percent of my paycheck to my retirement account. I put a large portion of this money toward a bond fund that I eventually moved into a dividend reinvestment fund.
After I left the hotel industry to become self-employed, those regular paychecks disappeared as did much of my income. With a wife, a house, and kids, it became much more difficult to contribute to a retirement fund on my substantially reduced income. However, my retirement savings continued to build due to the monthly dividend reinvestments that grew share total without any outside contributions.
This is just another way in which saving when you’re young can payoff later in life and give you a leg up on those who may have started later.
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The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.