It’s easy to understand why you don’t have a thriving retirement fund when you’re in your 20s. You just graduated from college, you’re attempting to climb the corporate ladder and every extra penny you make is deposited right into the “Things I’m Going To Do Before I’m 30” fund.
But starting to save for retirement in your 20s is a fool-proof way to ensure that your future self is well-provided for, rich and happy. Here are five simple tricks to get your retirement fund growing faster than your bar tab on a Friday night.
1. Start Saving.
This may seem like the easiest tip, but can be the hardest step to take. If you have never contributed any money into a savings account, you’ll quickly find that living without a chunk of your paycheck can be painful. According to Forbes, even in your 20s, you should only be living off of 85% of your paycheck. Your additional income should be put away in a separate bank account or investment opportunity.
It’s hard to consider retirement savings when you’re still paying off your student loans, but everything saved in these early years will be so important when you’re considering that lovely retirement villa in Florida.
2. Start Learning.
Sit down and try to learn at least some of the “money” words thrown around in banks. Concepts like “compounding” and “high-yield savings account” can be life-saving when trying to build your savings. For example, the “compounding” process ensures that the money in your savings account is accruing interest over time. A typical interest rate is 5% annually, which can add up quickly. If you initially start your savings account with $10,000, your annual interest will be $500 right off the bat. This means that in ten years, you can make over $6,000 just by leaving money in the bank.
3. Start Investing.
According to Money Under 30, the best way to start investing is through mutual funds. These are basically investment security blankets that allow you to put funds in various stocks to diversify your portfolio. Starting the investing process can take as little as $50 a month which is the price of one week of groceries or that new shirt your favorite influencer wore on Instagram. If you really enjoy investing and have the money to spare, look to real estate moguls like Aubrey Ferrao, who invest in land or housing properties early in their career and have the ability to tap into those funds over time.
4. Start Cashing in on Employee Benefits.
Most companies offer 401(k)s as an employee benefit. If you’re not enrolled already, sit down with the HR department and set this up. A 401(k) is an investment account, set up by your company, that pulls a few dollars out of each paycheck to painlessly start your retirement fund. Many companies also offer “matching plans,” meaning that they will match every dollar you contribute to your 401(k) account.
5. Start Planning.
Make sure you have a plan for the future. Be kind to your future self and figure out how much you should save up in order to live in one of the Aubrey Ferrao Naples resorts and live the beach life you always wanted. If you’re in a relationship, have a discussion with your partner about financial habits and future plans to ensure they aline.
It’s never too early to start planning for retirement. Even starting a meager savings account will help your future self immensely. And if you take strides with compounding, investments, and employee benefits, you will be retiring a millionaire in no time.