The Importance of Saving and the Importance of Saving Now
Greetings! The following words, sentences, and paragraphs are going to be written in an effort to communicate the importance of saving, and the importance of saving now. Maybe saving hurts too much. Maybe the thought of investing in something is confusing or overwhelming. Maybe saving is not fun. I agree, with all of that. Find a way to do it anyway. If you hope to retire comfortably one day, you will be glad you did.
Most employers have a 401k matching plan. If you do nothing else to set aside money for the golden years, take advantage of this. Even if all you contribute to the plan is one percent of your income, that is something. With the employer matching, you are missing out on free money if you do not. Who doesn’t like free money? Free money, even in small amounts, can make a difference over time. Don’t worry if the options within the 401k aren’t clear, there is time to figure out the best strategy for you. As long as you’re contributing something to the plan, your savings have a chance to grow. I would suggest talking to your plan overseer or someone you know in the investment world about the best strategy for you. I am of the opinion that younger people should be invested in high growth potential options and older people should invest in more conservative investment vehicles. Most retirement plans have a spectrum ranging from very aggressive to very conservative options.
I talked about the 401k plan first because I feel like that is definitely the best and easiest way to get started. One, because this is the only saving option available, with employer matching, offering you free money. Two, because most contributions are with pre-tax money automatically taken out of your paycheck, lessening the chances of you spending what you really want to save. Three, because over time and as your investing strategy changes, you will have some flexibility as to which options you employ.
Other options readily available to you may include opening a savings account, buying a life insurance policy that builds cash value, or buying land. You may want to dabble in all of these to “not have all of your eggs in one basket” as the old adage goes.
The title of this piece includes “the importance of saving now” so, let’s address this. I can give you all the reason you need in two words: compounding interest. Compounding interest works best the longer you have money invested. Let's say you put one dollar in a savings account, this one dollar earns interest. When the interest is paid to you, you now can earn interest on your initial investment of one dollar and the interest you earned. So, over time, even if you contribute nothing else, your investment will grow because interest accrues continuously on an increasing dollar amount. The longer the money is in the account, the longer period of time the interest is paid. The longer the money earns interest the more money you will have. So, start now.
Fee free to ask us at Marion State Bank how we can help you start saving!
-Wade Gunter, Credit Analyst