Twenty-something savings

Life expectancy at the turn of the 20th century was just 49 years. The world’s changed a lot since then. And increased life expectancy is one reason retirement planning is such a Big Idea.

If you pick up a book on retirement planning that even deals with 20- and 30-somethings, you’ll see the standard advice:

• Think about what you want from your retirement
• Run the numbers
• Create a plan and stick to it

Problem is, most 20-somethings can’t imagine what their lives are going to be like when they’re 40, never mind when they retire. If I had used my grandmother’s life, or even my mother’s life, as my guide, I would have been WAY off base. But I knew I would need money. And I knew the only way to have money is to make money and not spend it all.

The big message for a 20-somethings isn’t that you have to figure out how much you’re going to need, it’s that you have to get into the habit of saving. And that means not spending every red cent you make no matter how great the temptation. It means giving a nod to the idea that money not spent now is money you’ll have in the future. And it requires that you be conscious about what you’re doing with your money, as opposed to just letting it slip through your fingers.

The struggle to balance building retirement assets for tomorrow against today’s very real demands for cash means that often the Big Idea is pushed to the side. Ooops. There goes the Big Idea, hidden behind “not enough money”, “making ends meet” and “paying off student loans.”

It doesn’t take a lot of money to get on the savings train. Start saving in your early twenties and you’ll only have to sock away about 6% of your income to end up with enough. Since you have time working for you and you’re in it for the long haul, you’ll only have to save 6% for your whole life. That’ll sure take the pressure off when you’re also paying down a mortgage, having babies and having a life.

It boils down to this: would you rather save 6% starting now, or 18% later when you also have kids to raise, a mortgage to pay, and only the lord knows what other competing priorities?

Don’t be tempted to put off saving because later you’ll be earning way more money and will have more money to save. Life doesn’t get easier just because you make more money. If that were true, nobody who made above the average income would be worried about retirement. And that simply ain’t so.

There are a bunch of folks who have been making really good money who don’t think they’ll have enough when they retire. It would have been so easy if they’d started to save as soon as they started earning a living. Young’uns, listen up! Don’t do what they did. You’re smarter than that.