KJ: Starting to save early is not just a good habit to build for long-term success, but there are also some obvious mathematical benefits too. See the JP Morgan chart below which illustrates why it is so important to start saving young.
With the compounding effect of interest and savings over time (i.e. letting your interest earn you interest, so your $1 in interest today will make interest next year, and that interest will earn interst the year after and so on and so forth), starting later means you have to save significantly more just to accumulate a similar level of savings.
AJ: Kirby and I have consciously made decisions since the day we both first started our careers that follow this line of thought. There are always circumstances that are outside of your control that impact your ability to save as much as possible, but it’s imperative that you do save whatever you are able along the way to make up for lost time. The long-term benefits speak for themselves, so stay the course and learn to do without the unnecessary.
There are always excuses for not saving today, but the longer you wait, the harder and harder it will be to catch back up.
So, where do I begin?
KJ: As you work toward your financial security, consider the following prioritization:
- 1) Set up a savings or money market account at a bank (preferably one with no monthly fees and with ready access online or in proximity to your house and/or work), and make sure you get at least $1,000 put away as soon as you can.
2) Then, focus on paying down your debt while simultaneously building up your emergency fund.
3) Last (but certainly not least), once you’ve built up your emergency fund (usually best to aim for 3-6 months of your living expenses), then you can begin to focus on longer-term goals like retirement, children’s education, vacation slush fund, etc.
It’s not until you can make it to step three that you can really get your savings to begin to work for you, and as the chart illustrates, the sooner the better! For your life, maybe your “target” is to maximize your employer match in a 401(k), save for children’s education, fund some to your IRA, and set some additional “rainy day” funds aside to help with the unexpected that inevitably comes up (new roof or car repair anyone?).
- When did you start saving?
What’s holding you back from saving today?
Tell us about why you decide to save.
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