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Be Wise With Money
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Save early: Give Your Money Time to Work for You
May 1, 2017
Have your cup of joe and save too
Millennials get a lot of grief for enjoying their cups of joe. The fact that 45% have spent more on coffee than on investing in their retirement may have something to do with it.1
Other factors such as student debt repayments and saving for a car or a house are greater priorities than the distant future of retirement.
Save early and regularly
With retirement 35 to 45 years away, you may think you can start saving later because there's still plenty of time. However, as with any goal, saving early and regularly gives your money time to work for you.
Let's take a look at a hypothetical2 example:
Maria saved $100/month for 10 years starting with her first job. Then stopped. Yes, stopped!
Zach waited 10 years before he even started saving for retirement. He then put $100/month towards savings for 20 years.
In 30 years, who do you think would have saved more money?
Why? Her money had more time to earn compound interest. In other words, her interest earned interest. Maria put away $12,000 and earned interest for 30 years. Her money earned $22,435 in interest. Zach put away twice as much as Maria but earned less in interest since he only had 20 years to earn it.
The good news
Many millennials are off to a great start. In fact, 35% have a retirement account3 and 28% are putting away at least 10% toward retirement4!
Start saving today while time and compound interest are on your side. Take full advantage of the 401(k) employer match if your company offers one. It's free money for you and only aids in your ability to grow your balance and earn greater compound interest.
And you can still enjoy that cup of joe. Use this balanced spending worksheet to plan how you share, save and spend your income. Allow yourself a few pleasures that add balance to your life while saving for your future.
Think of it as paying yourself first. You are the only one saving for your retirement.
- Determine your life expectancy. Use this tool to see how long you might live in retirement.
- What's your risk tolerance? Understand your tolerance for risk so you can make informed decisions about your savings vehicles and rest easy.
- Retirement plan calculator. Determine your savings goal based on the information you gathered above and start purposely saving for your future.
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1Bowerman, Mary. “Spending More on Coffee Than Investing? You’re Not Alone.” USA Today. Jan. 11, 2017.
25% compound interest. Example is not intended to represent the performance of any particular investment and ignores market changes and management fees.
3Lincoln Financial Group. 2016 M.O.O.D. Survey. March 6, 2017.
4Wells Fargo Retirement Trust Study, 2011–2016 data. June 29, 2016.