It is never too early to start saving money, only too late. And the longer you wait to start, the harder it is to reach long-term goals like building up an emergency fund, saving for major purchases or ensuring you have enough money for retirement.
When you’re young, it’s hard to commit to putting money aside in a savings account that you won’t touch again for years — even decades — especially when your income may not be that high. By starting out with as little as $25 a month, and increasing the amount to save to greater levels over your lifetime, you can ensure you come out ahead in the long run.
Plus, starting out with a savings plan while you’re still young means you can take advantage of several strategies that won’t be possible when you’re older.
Seven Reasons to Start Saving Money Now
1. Slow and steady wins the race.
Those who start saving at an earlier age have an easier time reaching their financial goals than those who put off the task. If you are 25-years-old and want to retire at the age of 65, you will have to save a lot less money every month (although for a longer period of time) than if you are 55 and playing catch-up.
2. The power of compounding interest.
Many savings accounts and CDs provide compounding interest, which means that when interest is earned every day, month or year, those earnings are reinvested in your account and the interest begins earning interest. This allows your savings to grow exponentially, and the longer interest compounds, the faster your deposit grows.
3. Learn the skill of setting and reaching goals.
Goal-setting is an important, but challenging skill to learn. Starting off with a savings goal to work toward will instill the habit of setting goals, an excellent motivator that can help you achieve the next level in your financial, professional and personal life.
4. Save money in other ways, too.
Prioritizing spending and living within your means is an essential way to help improve the quality of life, as positive behaviors with spending and saving are rewarded in other ways, like maintaining a high credit score. With a higher credit score, you will be entitled to the lowest interest rates when you need to finance the purchase of a large ticket item like a car or a home.
5. You probably want to retire some day.
When you are young, it’s nearly impossible to think of yourself as a senior, ready to stop working and finally retire. But it will happen some day, and the earlier you begin saving, the better your life will be when that time comes.
6. Expect the unexpected.
Financial emergencies — like having a car break down, experiencing a serious medical problem or losing your job — happen to everyone, and the more you can set aside for an emergency fund, the less you’ll be negatively impacted when the unexpected does occur.
7. Believe it or not, you have more money to save now than you will when you’re older.
Right now, your biggest expenses might be paying rent, a cell phone bill and student loans. Some day, you will probably be married, have kids, a mortgage and a couple of cars. The older you get, the more complicated (and expensive) life becomes, so take advantage of your financial freedom while you can.