Posted 01/08/2013 by John Comer
Are they asking how much should I save or where can I get the money to save?
My most recent blog, “If you have the time you don’t need the money,” generated discussion in a number of different directions. My intent was and is to find ways to get young adults interested in saving for retirement while they are still young.
Someone pointed out that we should just tell a 25 year old that they need to save $1 for every $10 they need in retirement. Keep it simple. I agree as long as the 25 year old has already completely accepted that they need to start saving. This simple statement can be effective if they are just looking for guidance about how much to save.
Some young adults (and many older adults as well) have more goals than money. They may be making $30,000 but they have goals that call for them to make $40,000. Saving $3,000 for a distant expense like financial independence may be very easy to push into the future. After all, when I am fifty five years old I will already have furnished my home, my children will likely be out of the house and I will have reached my highest earning potential. It will be a lot easier to save later.
These young adults have more ideas for using their money than they have money. As they decide how to prioritize sharing, saving and spending they should realize that postponing savings requires them to save 15 times as much each year. Will their financial situation be 15 times as rosy in the future?