The Importance of Saving Money While Young

15
February

When you’re young, money might seem like one of the last things about which you need to be worried. You may have a good job, a burgeoning career, job security, good health – what could go wrong? There will be plenty of time to save in the future, right?

While it might be healthy to have an optimistic attitude regarding your economic future when you’re young, it can also be costly. By waiting to save money until you are older, you could be sacrificing a more secure financial future as well as wasting money that could bolster your finances during your golden years. While this doesn’t necessarily mean you must become a miserly hermit, who hoards his pennies under the floorboards, considering your financial future and starting to save money while you’re young can make the process of building a nest-egg easier, more effective, and more effective.

Compounding Interest
It often isn’t until you realize the power of compound interest that you begin to understand just how important the saving of money while you are young really is. By investing money in savings bonds, high-yield savings accounts, CDs or other interest building vehicles, you may begin to see your money grow. This growth over an extended period of time can be substantial and illustrate the power of compounding interest.

For example, let’s say you are 20 years old and have $1000 to invest. You don’t want to risk this money in the stock market and instead decide to invest it safely in a certificate of deposit at your local bank earning just 3% interest. You continue to reinvest this amount at the same rate over the next 40 years.

In this example, you might feel that you won’t come out too well since the amount and interest rate are so low, but due to the length of time of the investment, you might be surprised. That $1000 investment will become $1030 after the first year, then $1060.90 the second, then $1092.73, $1125.51, $1159.29, and so on and so forth until after 40 years you have a total of $3262.04.

Now just imagine that same example using $10,000 instead of $1000. You’d have $32,620.38 when you turn 60 if you just leave that money alone and let it grow. If you managed to find a return of 6% you’d have $102,857.18. Not too shabby, huh?

You’re At Your Peak
When you’re young, you may feel like you have the world in your hands and that the saving of money just isn’t that important since you have plenty of time for that later in your career. But when you’re young, you’re often in your prime when it comes to working hard, earning money, and having the knowledge, skills and abilities to get a great paying job that provides you with the financial ability to put some of your earnings aside without having to sacrifice much in the way of lifestyle or entertainment.

At a younger age, you’re often more attractive to employers since they may likely view you as recently educated, up to date on the latest trends, software, and technology, and as having the energy, drive, and ambition to make you a great candidate for a job or promotion.

Ten years from now those characteristics may have faded and your ability to land such a great position, not to mention great paying position, may no longer be there. This is why it can be important to put your money to work while you are young and at your peak, and before you are cast aside as outdated, over-qualified, or just plain old. Such a label could leave you searching for lesser-paying positions or any job that will take you, making it more difficult to save money and prepare for your financial future.

Age and Infirmity
No matter how well you plan and prepare, you just never know what the future may hold for you. As you age, illness, injury, layoff, or a poor economy can leave you suddenly and unexpectedly without a regular or sufficient income. By this time it might be too late to start saving and your prospects for future saving could be greatly diminished.

Such aspects of growing older mean that it can be very important to save in earnest while you are young. Not only do the possibilities of being unable to work when you grow older make saving early on important, but even if you grow old and remain healthy, starting young can make your financial future brighter and more enjoyable even if you avoid unfortunate pitfalls along the way.

Disclaimer:
The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. For financial advice, readers should consult a licensed financial advisor. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

Email  • Google + • Twitter

Comments are closed.