It is much more difficult to save money when you are young than it is when you are older. Saving money at an older age is made easier by years of experience amounting to multiple pay raises and less debt. However, self-control is necessary to ensure that your golden years are as comfortable as possible. Starting to squirrel away money at an early age is not only a great characteristic, but makes the money worth more in the long run. Ideally you are working and have the option to put money aside in an Individual Retirement Account (IRA) that is not only untaxed but partially matched by your employer. Translation… free money! When an employer is incentivizing you in this way you better take them up on it, especially since it’s a dying practice.
You might not know how an IRA works. Well, that is where Jason Hartman and his team excel, because we try to teach you rather than give you a bunch of technical terms that leave you just as lost as before. We will be focusing on Roth IRAs which you can contribute to tax free from every paycheck and are the most common. The only time that this money is taxed is when you withdraw
it, but hopefully this will be when you are retired and your income is not that high.
The most important thing to know about this account is that time is on your side. Contributing to your retirement account when you are young will allow it to grow more as the time goes by. This means that if you start to save when you are 20 years old, you will have much more interest accrued in the account by the age of retirement than if you had started when you were 30. Imagine that you are gaining even three percent in interest every year, on an initial amount of $10,000 this amounts to more than $3,000 over the 10 year span. This is money that many people lose out on only because they think that putting money aside for retirement is something your parents do.
It might be difficult to pass on getting the latest generation smart phone in order to be able to put money aside on every paycheck, but it is important to learn good savings techniques from youth. We are not trying to say to be a penny-pinching miser, because that life can get boring and lonely. Just be cautious where you spend the money and take advantage of opportunities such as matching IRA funds given by your company. (Top image: Flickr | Swami Stream)
The Young Wealth Team