I’m a college student. In my mind, retirement is a lifetime away. I’m much more likely to spend any extra dollars on meals out or new clothing than a retirement fund. In the meantime, I’ve got bills to pay, and my main priorities involve school and car payments.
A Self Magazine article made me think twice.
In between the money spent on gas and other not-fun-but-necessary bills is a little bit of wiggle room to invest. I think that as young people we find ourselves living paycheck-to-paycheck more often than not, but we need to push past that “I’ll save later” mentality and make an effort to sock away some of our hard-earned pennies in a bank.
I have a great love for shoes. I don’t have a lot of extra money, but you can bet I take a significant percentage of that extra cash to the department store. A part of the article that really spoke to me made the argument that if I invest that “shoe money” instead, it will turn into something more valuable later on down the road. The article gave the example that a girl who spends $100 on a pair of shoes, and accumulates 30 pairs would be able to invest $3,000 instead. And if you were to invest $3,000 at 7%, you’d have $24,435 in 31 years. If by the time I’m 50, I have that kind of money in my retirement savings, I’ll feel pretty good. That’s not to say it’s anywhere near enough to retire on, but it would be far better to have thousands of dollars invested rather than 30 pairs of old shoes by the time I’m 50.
So we’ve established that wasting money on shoes is not exactly a smart financial decision; but why else should young people start a retirement fund?
Well, young adults need to realize that marriage is not a safety net, and that you don’t always know what’s going to happen in the future. My dream life consists of finding a rich husband who has a financial plan and takes care of all the bills. Nowhere in that plan is any mention of me actually saving. But unfortunately, it doesn’t always work that way. It’s important to understand that your retirement fund can get screwed up by divorce, death, and many other factors. Creating a retirement fund independent of your spouse (or future spouse) gives you the freedom to live life the way you always imagined it. You won’t be stuck in a marriage that isn’t working because you fear the future, and you won’t be prevented from doing the things that are important to you.
So why do we need to save so much money for retirement? People are living for a lot longer now. A woman retiring at 65 can expect to live approximately another 19 years in retirement. According to the Self Magazine article, it’s not statistically likely that women will work continuously from now until retirement, either. Women are much more likely than men to interrupt their careers to raise families. Working less time means less retirement contribution, so you need to save all that you can while you are still a breadwinner. And men’s lives are just as unpredictable, so they should follow the same principle.
All that being said, I encourage all of you to start NOW. I’m going to take my own advice and start as soon as possible. The longer you wait, the harder it will be to start. You don’t want to be that person that is staring retirement in the face without any savings. The time to start saving for retirement is not 5 years before, nor 10, nor 20, it’s now. And if you have any extra money to spare, why not?