October 21, 2015 Written by: Casey Boland, Retirement and Financial Planning Specialist
The Power of Compounding and Why You Should Start Saving Early
If your 30s and 40s are behind you and you are either in retirement or close to that new chapter in your life, you’ve probably shared many stories and memories with your kids and grandkids. Have you ever thought about what you wish you had known at age 30-something that would have helped you better prepare for financial independence? And, if so, have you shared this with your kids or grandkids?
People seldom think about retirement when they are in their 20s or 30s; after all, the reflection in the mirror every day looks back at them with a young and confident smile. However, the years will quickly pass by (as you well know) and one day retirement will happen.
With the slow extinction of company pension plans and the uncertainty of Social Security, teaching your children and grandkids about how to manage their income and encouraging them to save for the future is more important than ever. Retirement will one day happen to them, and they will be expected to have saved for their own retirement. The sooner they start the better.
The most important thing to do is to start saving for retirement as soon as you can. No matter how small, any amount of money you can save when you're young will grow over time and help you reach your retirement goal.
Referring to the above chart, saving as little as $2,400 per year for 40 years (age 25–65), result in a nest egg of $545,416. Save for 30 years—starting 10 years later (age 35–65)will accumulate $248,159 in savings. Save for 10 years (age 25–35) and then stop, and the result is just less than $297,257. Time, patience, and endurance paid off for Chris and Lynn as they accumulated almost two times more than Bob or Sue!
Time matters, so get started now and let the powerful force of compounding do the heavy lifting for you. Let us know if we can help you set up a plan to reach your savings goals.
As a parent, it feels like our message to our children can “fall on deaf ears.” Let HCM help. Call to set up a time for one of our advisors to meet with your kids or grandkids and we’ll show them what you wish you knew at their age to prepare for financial independence.
Retirement and financial planning services at the Cincinnati firm, Hengehold Capital Management.
Content in this article is not intended to be financial advice. Instead, we think of it as educational, and financial education is important to us.