Children whose parents teach them to appreciate the value of money from an early age have a head start in life. If you were asked to do some simple chores to earn your pocket money and perhaps put your loose change in a money box you will grow up understanding that value as well as the concept of saving. These are valuable lessons because money management seems to be decidedly lacking in US society – judging by the level of credit card debt in the country as well as the minority of citizens who have a realistic emergency fund and adequate retirement savings. The Social Security System is under increasing pressure and every adult should look to take action to provide for their senior years if they expect them to be comfortable.
Pay Off Expensive Credit Cards
Debt can be ever present from late teenage years. Most youngsters pursuing an education need finance to do so. Student loan rates have risen but they still provide the best rates in the marketplace. Some students supplement their loans with spending on their newly obtained credit card. That is far less sensible because the interest rate applied to any balances still outstanding at the end of every month is penal. Would that people could invest and get a similar return on their own money!
The point is that credit cards are dangerous and carrying balances expensive. Those who realize the value of money may well have rejected the idea of an expensive credit card and those who didn’t should get those balances paid off as soon as possible. After graduation and when the pay checks begin to come in online lenders will provide realistic loans that are much cheaper; such a loan should be used to pay of credit card balances.
It is never too early to start to save and there is plenty of online information on the best available returns. Those who understand money management will also understand that saving towards the future is important. That may be a deposit for real estate, accumulating an emergency fund or beginning the long road to preparing for retirement. It is never too early to do that and compound interest ensures even small amounts grow quickly.
Those who clear expensive debt and start to save towards retirement which is probably 40 years in the future will reap the rewards for their common sense. As an illustration, if you put away $100 a month from the age of 25 at 8% the fund would have reached $60,000 twenty years later. You will need a far greater sum before you retire but if you increase the monthly amount over the years the growth will be impressive. Is $200 a month realistic after you have been working for 10 years? Perhaps even $300 and if you have a 401K agreement with an employer who contributes as well you will be doing nicely.
Loss of Years
If you forget about retirement until you get to your forties you have lost the aforementioned potential growth and also have many fewer years to establish your fund before your retirement looms large.
The Social Security System is the savior of many who have not made sufficient provision for retirement. A figure of 40% of the population draw benefits at the minimum possible age, 62. Those who can delay taking benefits until the latest date, 70, receive far more. Those that began their preparations for retirement in their 20s can rely on another investment; the growth they get on the eight years when they have deferred their benefits.
If they have managed their money well there are several options for saving even more. The Internet is a great place to find out information and the financial sector is well covered. Some use real estate as a means of accumulating assets, the S&P 500 offers growth with minimal risk. While the recession caught most people in some way that is no reason not to prioritize paying off debt and saving towards the future.
The recession was a shock but it has receded. With levels of employment rising month on month things are returning to normal. Normal should be responsible spending and saving for the future. Those that are not doing that are ignoring a valuable piece of advice.