Sunday, December 13, 2020

Start Saving for Retirement when you Turn 18

While it may seem a bit boring to talk about, it's never too early to start saving for retirement. I've been advising my students of that for nearly twenty years -- as soon as they start earning money, they should make a practice of saving 10% of everything they earn, and they should start paying themselves first by opening a Roth-IRA as soon as they have earnings to save. I first learned those lessons from my dad who advised me in my twenties to start investing some extra money I'd made while teaching abroad, and I refined them for my students after reading David Bach's The Automatic Millionaire. Based on Bach's book and a short column from the Market Watch in the Wall Street Journal about the magic of compound interest, I developed a quick financial primer that I used as an intro to class early in the year. I've learned since that some of my students, now approaching their thirties, have been saving since high school. They're not the only ones. Elizabeth Harris of the New York Times profiles three twenty-something Millennial/GenZers who have already started saving for retirement.

When Dray Farley was 15, he watched a video his favorite gamer had posted on YouTube. But it wasn’t about Call of Duty.

“It was how to get rich in 22 years, and the general math and concept of compound interest, the snowball effect, and how eventually your gains are making gains,” Mr. Farley said. “And that’s what first got me thinking about retirement accounts.”

Mr. Farley, now 21 and completing his final semester at Cornell, knows his middle and high school gaming habit was an unlikely path to an interest in saving and investing. But after his own college experience and internship were disrupted by the coronavirus pandemic last spring, he said he valued saving even more.

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