As a financial planner, one of my favorite exercises is to sit down with young adults and teach them about investing and finance. It seems that the sweet spot to have these conversations is around 18-20 years old, mainly because most of them are in college and are dreaming about what is going to happen when they graduate. They are thinking, "Where am I going to Live?," "What will be career?" or, my favorite, "Will my parents still pay my car insurance?" They are so excited about what life has in front of them.
If you are a college student or a parent of one, just know that most 18 - 20 year olds do think what it will be like to hopefully support themselves without their parents help. However, the thought of retirement is usually not on their mind this early.
If you Fail to Plan you are Planning to Fail
The reason that retirement should be on their minds is because the earlier you start, the easier it is to reach the goal. When students graduate and get that first job they may bite off little more than they can chew. The excitement of making a paycheck and starting a career can sometimes put them in a situation where they can't afford to put money away each month. May they purchase a little too much; like a fancy car or a house that stretches them a little thin financially. All of these things are important, but I always tell them if you just put away 10% of your income from the start you will be amazed to see that small amount each month can turn into a huge amount in retirement. Most importantly, you will be less likely to overextend yourself by trying to keep up with the Joneses. When you first start your job you will never miss it because you never counted on it in your budget. They are amazed to see that a small amount each month can turn into a huge amount in retirement. Most people do not think about putting money away until they are in their mid 40’s at this point you have to put away nearly double to have the same results. Planning retirement early can help build a nest egg with half the effort.
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