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Be Wise With Money
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Why it's Important to Save for Your Future Now
March 7, 2018
Many of us aren't focused on the future because we're busy with what's needed today. But what could happen if we don't start to plan now?
Planning for your future is much like dating. If you aren't putting in the effort, it won't work. Don't flirt with your future – own it! Your retirement and other plans may not have the financial resources when you need them if you don't start today. Consider the following:
- Emergency savings: Could you handle unexpected expenses like a medical emergency? Would you have to take on more debt? This could negatively impact your credit score and the interest rate you pay.
- Retirement savings: Would Social Security alone provide the income you need to live comfortably in retirement?
Don't fear the unexpected – plan for it!
"It'll never happen to me!" Or will it? According to the latest Fidelity New Year Financial Resolution survey, 65% of Americans fear unexpected expenses1. Don't wait to get the answers until the event happens. If you were to fall short financially, your options become limited. Having savings to cover three to six months of expenses is a good rule of thumb.
Saving for retirement, a college education or other large financial event needs to be part of your plan too. And you need to be committed to saving regularly. Why? Because of a little thing called the "time value of money."
The time value of money & compound interest
In other words, money available today is worth more than the same amount in the future due to its potential earning capacity. In other words – earned interest.
Another concept that comes into play is compound interest. Your money and interest earn interest. The more time interest can accumulate, the greater your money's potential growth.
How does it work?
Let's look at a simple illustration of these two points:
- You put $100 per month toward your retirement for 20 years.
- You earn 6% compound interest on your savings for 20 years.
For illustration only. Does not take into account any market or economic fluctuations to savings.
In this example, you nearly double your retirement savings account in 20 years. You would have more than $46,000 in savings and you only contributed $24,000. Your money is working for you!
Willing to roll the dice with your future? You won't get a redo. Don’t flirt with your future – own it! Start saving and planning today so you can have the future you desire!
Tools to use
- Discover your values: Define what's most important to you (not your friends and neighbors). Your values are your compass for decisions.
- Balanced Spending worksheet: Intentionally plan for all the uses of your money. How and where you want to share, save and spend.
- Retirement Planning Calculator: Get an idea of what you need for your goals.
- Funding a college education: For one or more children or grandkids, understand how inflation can impact the future cost of a college education.
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1Fidelity's 2017 New Year Financial Resolutions Study