When you’re young and fresh out of college, presumably, you’re earning the bottom of what your career can potentially yield after 20 more years in the business, but that doesn’t mean you should bank on making more money in the future as your savings plan.
Let’s put it this way. If you’re young, and making $30,000 a year, you should assume that you will make $30,000 for the rest of your life (even if it isn’t true).
Why?
Because you don’t know what will happen.
You could make $30,000 now and $300,000 next year, but you may end up only making $30,000 forever. It’s an awful possibility, but it’s true.
People who think “Why do I need to save for retirement or emergencies now? I have 20 years to make more money, and I’ll save a whole bunch, then. I don’t even have extra money to save now anyway. My budget is too tight“, are just kidding themselves.
If you don’t save anything now, but you end up being way behind your expectations of salary, it’s just a recipe for financial disaster.
When you save money as early and as young as possible (even if it’s very tight in your budget to put aside even $25/month), you’re building an insulation against what I’ve described above.
What if you end up at the age of 65 realizing too late that if you had started saving $25/month 45 years ago, at 5% interest, you’d have had $51,893.41 at the end of it? All depends on your savings rate I guess (some examples here)
It still may not be enough to live on, but $51,893.41 is better than $0. Or being in debt in your golden years.
Saving as early as possible is always the best path to being financially secure and wealthy, even.
Just a girl trying to find a balance between being a Shopaholic and a Saver.
I cleared $60,000 in 18 months earning $65,000 gross/year.
Now I am self-employed, and you can read more about 
I’m trying to save as much as we can now that we can live a simpler life. 🙂
I opened an IRA at 19 with 2,500 dollars. I wish it would have been more.
I used to think that I would have to pay off my credit card debt before I saved money. But now I learned that I can do both. It makes me feel better to know that I have money saved up; it also is the reason that I was able to cut my work hours this summer.Â
Well said.Â
I think compound interest is another big factor. Saving $25 a month when you are young may not seem like much, but if you wait until you are 20+ years older you are going to need to save a lot more to equal the amount if you started young.Â
agreed. Saving when young also puts a boost on your savings later. I make more income now than I did last year (about 2x as much!) but I already had thousands of dollars in the bank so I don’t feel “rushed” to save like crazy. Also every goal is closer because I’ve already put a few years of savings in the bank.