If you have access to an employer-sponsored retirement account, such as a 401(k) plan, you should contribute as much as you can to it, or at least enough to take advantage of any employer matching contributions. By waiting 10 years to start saving, she sacrifices more than $500,000 in potential returns. But if that same person waits until she is age 35 to begin saving, and puts aside the same monthly amount and earns the same rate of return on her investment, her savings will have grown to just $375,000 by the time she reaches age 65. By the time she reaches age 65, her savings will have grown to more than $878,000. To illustrate the effect of compounding, consider a 25-year-old who puts aside $250 every month for retirement and earns an 8% annual return on her investment. If you start saving early when you’re young, you may be able to grow your savings at a much faster rate than those who wait-because of the power of compounding. When saving for retirement, it’s not just the amount you have to invest that matters, but also the length of time you have to invest. While retirement may not be a top-of-mind concern right now, it is important to start saving for retirement early. Having an emergency fund means you won’t have to rely on credit card debt to pay for emergencies and other unexpected expenses. However, an emergency fund that can cover at least three to six months of basic living expenses in an interest-bearing savings account can ensure that an unexpected emergency won’t totally derail your financial plans. Unexpected expenses, such as a huge car repair bill or a medical emergency, can easily wipe out a budget. The main benefit of a savings account is fast and convenient access to cash when you need it.īuilding up an emergency fund should be a top priority. Almost all banks compound interest, which means you earn interest not just on the principal, but also on the interest you earn. The amount of interest you earn generally depends on the interest rate, how long you keep the money in your account, and how the bank pays the interest. This way, what is out of sight is out of mind, and you avoid the temptation to spend money that you could be saving.Ī great place to start saving is with an interest-bearing savings account, which can keep your money safe while your money grows with interest. If your employer allows direct deposit, you may be able to have a portion of each paycheck deposited into your savings account. You could wind up in debt or be unable to afford important big-ticket purchases.Ī simple way to integrate saving into your monthly budget is to automate it. Otherwise, if you’re living paycheck-to-paycheck and are not careful with managing your money, it can be easy to lose track of discretionary spending. You’ll know how much you need to set aside each month for basic living expenses and savings, and how much you have left over to spend on lifestyle expenditures such as dining out in restaurants and entertainment. A well-designed budget will help you prioritize your spending and saving. With a budget, you track your expenses to get a clear picture of where your money is going each month.
0 Comments
Leave a Reply. |
Details
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |