When it comes to financial planning, it is best to start when you are young. Planning your finances when you are young comes with many benefits, including having time on your side, saving money in the long run, and building good habits like budgeting.
Time is On Your Side
If you’re in your 20s and already thinking about retirement, then time is on your side. When you are young, you have more time for saving and investing, and you can let compound interest do most of the work that will get you to a comfortable retirement. The earlier you get started on contributing to a retirement fund and saving money for emergencies, the better. You can grow a lot more money over 50 years than you can over 25. Starting early means getting a head start.
Starting Early is Cheaper
Starting early helps you to save money in the long run because you can make mistakes with smaller amounts and still have time to recover. Learning early on what to avoid will help you avoid financial errors and learn good financial habits.
Things like life insurance are also cheaper. Term life insurance is much cheaper when you are young and healthy; life insurance premiums are much less expensive if you purchase your plan before you get on in years. You will avoid larger costs by starting now.
You Can Start Budgeting
Starting financial planning early on can help you build good budgeting habits. The key to saving money is to spend less than you bring in, and beginning to practice this in your 20s will benefit you throughout the rest of your life. It is recommended that you live on 80 percent of your income and save the remaining 20 percent or invest it. Following this tip from an early age will create a habit.
With budgeting comes record keeping. Stating to keep track of your money when you are still young will help you develop an understanding of how much money you earn and spend and teach you to make good financial decisions.
Financial planning for events like emergencies and retirement can seem irrelevant when you are young and healthy, but the truth is that now is the perfect time. When you start financial planning in your 20s, you save money, build good habits, and reap the rewards of extra time. Starting to plan your finances now is a decision that comes with many benefits.
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