There’s never a good time to save money. But saving just a little bit while you’re young will pay dividends down the road. Liz Moyer writes at The Wall Street Journal:
Earning power is often limited in your 20s. You may not have enough knowledge or experience to command a large salary.
But you do have an asset your elders covet: time.
Make the most of it, even if you save only small amounts at the outset. Those savings will generate interest, and then the interest will generate more interest. The pile may grow slowly at first, but the pace will accelerate as you continue to save and the numbers get larger.
That compounding effect gives you an advantage over people who postpone saving.
For example, if you set aside $3,000 a year from age 21 to age 30 and then saved nothing more, you would have $227,111 socked away by age 60, assuming an annual return of 6%, saysBen Wacek, a financial planner based in Minneapolis.
If you instead procrastinated until age 41, you would need to save about $9,621 a year until age 50 to end up with the same amount of money at age 60, says Mr. Wacek, who has a number of clients in their 20s and early 30s.
In the first scenario, your total out-of-pocket cost would be $30,000. In the second scenario, it would be $96,210.
