In case you haven’t heard, compound interest
is the best.
You may remember it as an equation you had to
memorize for math class, but it’s so much more than that. It’s the concept that
powers all sorts of savings and investment products and, over time, allows you
to turn your money into, well, more money!
Compound interest = more money for you!—those
who can potentially benefit most from it (those in their teens and 20s) don’t
seem to be taking advantage of it. Savings contributions and retirement savings
participation rates are falling among young adults.
So if we understand that compound interest
translates into free money down the road, what could possibly be standing in
the way?
As it turns out, it’s not so much a math or
finance issue as it is a life issue—if we have trouble identifying our life
goals, we’ll also have trouble planning and saving for them.
Acknowledge the big picture
This is a tough one, because a lot happens
between your teens and your 30s. You’ll experience a combination of moving out,
starting your career, dealing with student loans, getting married, financing a
home—all these things have their own set of stresses that make it difficult to
see past them. When you’re a new grad and job hunting, it’s hard to imagine
yourself retiring in 40 years. If you’re living with your family rent-free,
it’s hard to imagine yourself putting down a deposit on a home. If you’re
living paycheck to paycheck, it’s hard to imagine having enough to pay off your
student loans.
The first step is to acknowledge that you
want these things, even if they seem impossible right now. You want to retire
comfortably. You want to buy a home. You want to live debt-free. You may even
want to travel or go back to school. These goals may seem far away, but they’re
definitely there and they’re certainly not going away. Every day that goes by
is one day closer to the time when you want to achieve those goals.
The good news is that a little bit of your
time and energy now can go a long way later. How about stop by your local
TFCU branch to learn about our savings products. When you’re dealing with
compound interest, the longer you wait to get started, the less money you’ll
earn in the long run.
Don’t let decisions overwhelm you
Not many people enjoy making
decisions—especially when it comes to life changes and major financial
commitments. It’s easy to understand why—decision-making is scary (not so much
the actual “deciding” part, but more the
“fear-of-making-the-wrong-decision-and-regretting-everything-forever” part).
Savings goals require you to make a lot of
big decisions. You need to choose goals to focus on, you need to choose between
different banking products and you need to choose how to distribute your
savings contributions. Sometimes the choices are brutally blunt, such as
choosing between owning a car and paying off your credit card debt.
The important thing is to not let all that
decision-making overwhelm you. Remember: just by facing those decisions, you’re
making progress, because you’re establishing what’s most important to you and
you’re renewing your commitment to your goals.