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Retirement planning can start in any decade of your life.  In Chapter 2 of the book, Your Insiders’ Guide To Retirement, we say you must have a plan.  Setting a goal is not the main thing. It is deciding how you will go about achieving the goal and staying with that plan.  If you start early in life and can pass that guidance along to your kids or grandkids, investing for your retirement can add up quickly!  Here are a few quick ideas for getting started younger in life.

Your Teens –

  1. Set up a teen checking account.
  2. Learn about compound interest and how money works.
  3. Introduce Budgeting.
  4. Understand Credit.
  5. Allow teens to make mistakes (overdraft, non-sufficient funds)

Most banks offer a teen checking account with a debit card.  Young people can log in online, have an app on their phone for accessing their bank account, and learn to read a monthly bank statement.  Introduce how compound interest works, as your money earns interest and builds up over time.  While the $100 balance in their checking account may only earn $2 over the year at 2% interest, imagine if it was $100,000.  Then your balance would earn $2000!  Teens should learn about the wonders of compounding interest early in life.  Next, introduce how a budget works.  Most teens use Google docs, and can create a spreadsheet.  Write down expenses and track them on a monthly basis. At 18 or 19, teens can acquire a credit card and learn about building good credit and paying off the balance every month. This might be a time to help them understand their credit card statement and how the company makes money off their balance if they don’t fully pay it off monthly. Mistakes will happen, and these early years with lesser consequences are a great time to develop good practices. These small habits will build kids into excellent savers for the years to come.

20’s –

1. Organize your money into buckets.
2. Pay off debt – student loans and credit cards.
3. Focus on building good credit.

After college, set up multiple accounts and make all of them automatic monthly savings and investment plans. Invest and plan for your future goals.  Banks will let you open up as many accounts as you want, and separating your money into different “buckets” will help organize your financial life. Picture your money filling up buckets just like water. It’s called the bucket approach. Pay down your student loans monthly and establish a good credit rating from staying on track. 
Accounts to establish are –

  • general checking account – rent, food, clothing, the basics of life
  • emergency cash savings account – 3- 6 months of savings in case of a sudden job loss or move
  • saving for future home account – you’ll want to buy a home or condo in the years ahead, single or married
  • vacation account – reward yourself, you’ve worked hard and now have the freedom to enjoy yourself
  • IRA or 401k account – start investing for retirement – if you have a corporate work plan, and they offer a match, make sure you take advantage of it. Meaning if the company matches up to 5% of your contributions, make sure you allocate 5% of your paycheck to the plan. That match is free money! If you only put in 2%, they are only going to give you 2% – you’re leaving money on the table. If you don’t have a corporate work retirement plan, open up an IRA and establish automatic monthly investing.  Use low cost index funds and be aggressive in your stock index exposure.  You won’t touch this money for 30-40 years and can take the risk.

Start now! Investing $200 a month from age 25-65, with a return of 7%, will bring your retirement account to over $500,000.  If you wait until age 35, the amount is cut in half to just $240,000.

30’s –

1.Protect loved ones with your money (life insurance, update beneficiaries)
2.Buy a house
3.Start college savings accounts
This is traditionally a decade of life changes, marriage, kids, a home, and if something happens to you or your spouse, you’ll want to have life insurance to protect these people in your life. Look into term life insurance for 20-30 years, and if you pass away your heirs will get a tax-free check to help pay off debts and provide for their wellbeing. Buy a condo, townhouse or house. Renting gives you no tax write offs or appreciation. If you are spending $1500 a month on rent at age 30, over the next ten years you will have spent $180,000 on rent! Buying a home gives you shelter, a need in life, yet also is an investment asset. Look for low down payment options for first time home buyers. Rent out a room if needed. Buying a home now will allow you to pay it off in 30 years, in your 60’s near retirement. Or it will help you build equity and sell it to move to another home.
If you have children, open college 529 savings accounts where money can grow tax deferred and be used tax-free for college. Set up automatic monthly contributions and investments. Start with a small amount, say 50 dollars a month. Raise it every year. The important part is to get started and create that additional savings bucket. 

Wanting to learn more? Bob Veres, a friend and local expert in our field, wrote an ebook answering his daughter’s financial questions. We’d be happy to email a copy – send your request to:

More to come on another blog – 40’s, 50’s, 60’s and later 70’s, 80’s, and 90’s – stay tuned!

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