Start Saving for Retirement as soon as you can, or…


As you know investing and retirement are closely linked.
And as a reader of my newsletters you know I am a passionate believer in planning for your retirement as early as possible.
Here are a few articles you may want to look at where I wrote to you about retirement:

What is money death and how you can avoid it

Living knowing your retirement fund is bankrupt

Slow motion train wreck – German demographics

Start as early as you can
I am thus very happy to post an insightful article written by Thomas Nashng at PensionReviews.com that shows you why it’s so important for you to start saving for retirement as soon as you can.

Why you should Start Saving for Retirement as soon as you Start Work – Guest post
by Thomas Nashng

Hold that spending spree
Most people are told that they should start saving for retirement as soon as they start their careers, but the temptation to go on a spending spree when you get your first pay checks is a strong one!

I am going to try and convince you that you should resist this temptation and start putting a small amount away per month to reap the benefits later in life.

Starting small is easy
Firstly, putting away a small amount per month needn’t be too much of a struggle. Small costs on a monthly or weekly scale can really mount up when worked out annually, for instance, many people pay for a gym membership that they rarely use, this could be around $70 per month, which doesn’t seem that much but works out to $840 annually, a much more useful sum.

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You can even save lunch money
Other money saving ideas could be making your own lunch for work, rather than spending $10 per day on eating out, if you made a lunch yourself, which is often a lot healthier as well, you could save up to $7 per day. This works out to a massive saving of $1,680 per year! This also applies when working the other way, putting away a small amount per week or month can add up to a large saving at the end of the year.

A convincing comparison
If that doesn’t convince you that you can save straight away, maybe a comparison between two people that begin saving at different times may help, you may be surprised by the results.
Two people, let’s call them Tom and Charlie, begin saving for their retirement and aim to be retired at 60.

The early saver – Tom $150 per month
Tom is a more organised saver and begins saving at 20 years old, at this age he starts putting away $150 per month and has 40 years to save.

The late saver – Charlie $300 per month
Charlie is less organised and begins putting away $300 per month at age 40, he has 20 years to accumulate savings for his retirement. They have both put $72,000 away in total, but the effects of compound interest means the amount they end up with is much different!

What they end up with $324,000 v $157,000
Assuming they receive an average return of 7% per year on their money, the more organised saver,
Tom would end up with $324,000 in his final account and Charlie would end up with $157,000. This is a huge difference, Tom ends up with more than double when he comes to retire in fact, and displays the advantage of getting your money to work for you at an early age, rather than cramming all your saving into your later career.

Why the difference
This huge difference, as I mentioned before, is all down to compound interest. This is when the interest you earn in the first year can earn interest for you in the second year as well as the initial sum that you saved, this may not sound like it would make much difference but the effects when extrapolated over a long period can be staggering!

Also for emergencies
In addition to the clear financial benefits, there is also the security of knowing that you have money stored away in case of emergencies that crop up, and they will crop up, over the course of your lives and careers.

Small amounts started early pays off
I hope this article will show people the benefits of beginning their saving earlier rather than later, and also demonstrate that it doesn’t have to be difficult or a struggle as just putting a small amount away often will really pay off in the long run.

About the author
The article was written by Thomas Nash, a graduate in Economics from the University of Manchester, now working at PensionReviews.com raising awareness of the need for people to be adequately prepared for their retirement financially.
Your early retirement analyst