1. The Cost of Living is On the Rise
The number one reason that people need to start saving money earlier is because there is a higher cost of living. Just a few decades ago many families operated on single incomes and in relative terms, still brought in the same amount of money that dual-income households make today. Putting money aside used to be a far easier task and this allowed people to save money for a brief time and retire when they hit 65. Today most people will need to start saving in their 20s if they want to retire before they hit the age of 70.
2. More than Just Retirement
Those who are in their 20s need to start saving now because they aren’t just saving for their retirement. People in their 20s don’t just need to save for their retirement they also need to save for their weddings and their homes. Housing costs today are far more than they have been in the past even following the housing crash. This means that many people will have to save for many years to be able to afford a down payment for a home for their family. Weddings today are also far more expensive than they used to be. Even a simple wedding can often cost a couple tens of thousands of dollars and having to borrow the money for a wedding will leave a couple in debt early in their relationship.
3. Emergencies Happen
Medical emergencies and other types of emergencies happen all the time and not having enough of a savings can be extremely damaging to a young professional. No one wants to go into debt at the wrong time and a healthy savings account can prevent undue financial stress from entering a person’s life. Unemployment rates are also still very bad which means that a professional could lose their job at any time and not be able to replace it. Having a savings account will enable a young person to weather these difficult times without having to turn to loans or their parents.
4. Financial Habits Last a Lifetime
If someone starts saving early in their life they will find it far easier to keep saving in the future. Developing good financial habits takes time and if someone waits for too long they may find it very difficult to adjust to saving money at a critical time in their life. The more money a person saves the more secure their future will be.
5. Social Security Isn’t Guaranteed
In the past many people relied on social security to make up for gaps in their savings plan. Today no one can say for certain what is going to happen to social security or if it is even going to be available to young people when they retire. People who wish to be safe need to take action to save all of the money they will need for retirement, not just some.
6. The Next Generation Isn’t Certain
Many people used to rely on their children for financial security in their old age but this is no longer a guarantee. Many young people today are choosing not to have children at all and this means that there will be no relatives to fall back on in the future. Those who do have children have no guarantee that their children’s financial future won’t be even more difficult than the financial means of young people today. Beyond that most people do not want to be a burden on their children or grandchildren.
7. It Isn’t As Hard As It Seems
The reason that most young people hesitate before starting a savings plan is because it seems difficult. With the help of a qualified financial planner it can be very easy to get a manageable savings plan in place. Due to the way that the market works even saving a small amount of money today will lead to the money growing significantly by the time the young person wants to retire. The earlier that a young person begins investing the greater the returns will eventually be thanks to the growth of the market and compounding interest.
Medhat Takla is a financial planner in Perth, Western Australia for Chambers Investment Planners. You can also find Medhat on Google+ as well.
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