What Is the Number One Financial Lesson for Young Workers?

  By Seth Jentner
Seth Jentner

The number one financial lesson for young workers is simply stated:   Save as much as you can now.

Here’s a lesson to keep repeating to your children and grandchildren:  It’s easier to save $400 per month toward retirement than to save $6,000 per month.

Seems simple, doesn’t it? Yet it might be the hardest financial chore a young person can undertake. The reward, however, is more security in retirement and financial independence.

First, here’s where the monthly savings numbers come from:

A 25-year-old worker who wants to accumulate $1 million by age 65 and who expects to make 7% per year needs to put away $381 per month.

However, the worker who delays saving for retirement until age 55 must put away $5,778 per month—or more than $69,000 per year from age 55 to 65 to get to that $1 million goal.

It’s all about compounding of gains, of course:  The much longer period a young worker has until retirement allows his or her savings to grow substantially over the years.

In fact, the first $381 the worker puts away is the most important. If she starts at age 25 and deposits this each month until age 35 and stops, and her brother delays starting until age 35 and starts putting the same amount away until age 65, her brother’s account will never catch up to her account. But, of course, once you have established the habit of depositing something from your paycheck each month, you will likely maintain that habit throughout your life.

Savers who start early get a break later in life. It may be difficult to come up with $381 per month at age 25, but over time with inflation and salary increases, it should become a snap to put that money away in later years.

Even if a young worker can’t save that ideal amount right away, saving as much as possible each month and then regularly increasing that monthly amount should enable him to achieve his goals. The worst move is to delay saving until later in life.

Help your children become financially literate and financially responsible. Encourage them to start depositing money out of every paycheck, no matter how young they are. Let the wonders of compound earnings over time help them reach their own financial independence.  This will be a gift far greater than any amount of money you may give them.

For more insight, listen to Jentner Wealth Management’s weekly podcast by clicking here. Or download Jentner’s newest white papers on The Four Cornerstones of Prudent Investing and The Active Versus Passive Investing Debate.



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