Holy Mackerel - Saving Money Now Adds Up BIG!

As twenty-something newlyweds, Mr. Thrifty and I find it as hard as most people to put aside savings in our 401K and other investments each month. However, a recent article on MSN Money confirms that saving money in our twenties is going to pay off big when we're older.

"Consider this scenario: If you begin saving for retirement at 25, putting away $2,000 a year for just 40 years, you'll have around $560,000, assuming earnings grow at 8% annually. Now, let's say you wait until you're 35 to start saving. You put away the same $2,000 a year, but for three decades instead, and earnings grow at 8% a year. When you're 65 you'll wind up with around $245,000 -- less than half the money."

WHOA.

Hard to believe that if we were to wait just ten years, we could be losing out on half of the money we'll see since we're starting to save at a young age. The savings/year numbers used above seem fairly conservative, and if you are fortunate enough to have a company that has a matching program, it makes saving over time even more fruitful. I realize that a half million in 2048 won't be the same as a half million in 2008, but if you're able to save more and more each year, that puts you in an even better position.

However, like I mentioned above, most twenty-somethings don't realize the importance of starting to save now. Human resources consultant Hewitt Associates conducted a study and found only 31% of Generation Y workers who are eligible to put money into a 401(k) retirement savings plan do so. That's less than half of the 63% of workers between ages 26 and 41 who do invest in employer-sponsored savings accounts.

One book that may help young investors is Getting Started: The Financial Guide for a Younger Generation by Brian Jones. The book breaks down different stages of life, and offers suggestions on how to make the best financial decisions at each stage.

As a gentle reminder, we're not claiming to be financial advisors, we just do our best to pass along information that we find helpful as we make financial decisions. We always recommend doing your own research, and enlisting the help of a financial planner when appropriate.

Mrs. Thrifty