Why You Should Invest For Retirement In Your Twenties
Most people don't start saving for retirement until they are in
their fifties. They wait, and they can always find excuses to
put it off for another year. My kids need to go to college,
there's a new baby, I need a new car. All these things are
always going to exist - you could come up with a never ending
chain of excuses not to invest. But the smart investors will do
it young - and here's why.
The reason not to wait until you are in your fifties is because
of a simple principle called "compounding." Investing a small
amount now will get you a much larger amount later because you
earn interest on the interest that you've already made. It's
like a snowball effect - as more money gets added to your
portfolio, you make even more money in the next year. That means
that the longer a period of time over which you're investing,
the more money you will end up with, even if you put in the same
amount as a person who invests only in their fifties. The
results can be dramatic over a forty year period, and you often
only have to put in about a quarter to half as much into your
retirement accounts to get the same amount as a person who
waits. So start investing when you're young. You'll develop the
right financial habits and you'll end up with a healthy
retirement fund, at a lot cheaper cost than the rest of us.