No time (or money) to start investing for something so far away?
The first time I ever heard the term “retirement savings” was when I landed a job with a traditional company in my 20s. We got called in by our HR department and were given a spiel on market performance and company matching, most of which went right over my head because all I could think was, “What? You wanna take even more out of my paycheck?” I could see no good reason to start investing now.
I think most of us, when we are in our 20s, just assume that we will make more money later.
Retirement was so far off the map for me. (How ’bout some help with this student loan payment instead, eh?) I understood that the company was also matching up to a certain percentage. But the money that they’re taking out of my paycheck, what are they doing with it? Where is it going? I need it now.
I think most of us, when we are in our 20s, just assume that we’ll make more money later. We reason that we have too many financial demands right now to worry about something so far off. It’s not uncommon to believe that we can tackle something as abstract as retirement…later. And yet, money grows faster over time thanks to compounding. That means that the more time you have to grow your money, the more your money will grow. In other words, the earlier you start, the more money you will have.
You can see why delaying retirement savings is the exact opposite of what you should be doing, right? But “should” is such an ugly word. So let’s stop trying to force the issue on ourselves. Forget about retirement. Seriously, just forget about it.
Forget about “retirement.” Seriously, just forget about it.
Instead, think about how you can make the money you are earning today even more powerful. Because not only can you grow your money faster the earlier you start investing, but you can even help to support changes that you want to see in the world by investing your money in companies that are solving the world’s biggest problems.
Think about something fun (that’s just a few years away)
Instead of retirement, how does a down payment for a house in 10 years sound? Or a gap year to travel the planet? Or enough eff-you money to quit your job and start your own business? If you start investing now, you are going to approach these goals much faster than if you merely stuff your savings in a savings account.
Why you’ll reach your goals faster if you start investing
1. You’re losing money in a savings account
Savings accounts have lower returns that simply can’t keep up with the cost of inflation. Savings accounts pay you 0.75 – 1.9% interest per year. Compare that to the average annual inflation rate, which has been 3.15% per year since 1913. This means you are actually losing money over the long term by keeping it in a savings account! What?
2. A savings account isn’t safer (over the long term)
It is true that a savings account is safer than an investment account…in the short term. That’s because investments can go up or down depending on how the companies in your portfolio perform. However, as long as you are not day trading or planning to take the money out in the short term, investing is a much better bet than saving if you’re looking to grow your wealth.
Over time, it’s more risky to keep your money locked up in a savings account because you are taking away from your future by 1) allowing inflation to eat away at your savings and 2) not taking advantage of market growth.
3. You’ll make more money in the market
The stock market has returned an average of 7% per year since 1926. The lowest return that the stock market has ever had during any 20 year period has been 6.4%. And the best? 18%. Compare that to the paltry 1-2% return in a savings account. If you start investing today, you’ll make a lot more over time than you would in a savings account.
When you take the “retirement” out of the title, growing your money by investing seems a lot more approachable. Investing your money is better than merely saving “cash” when you have 10 years to let your money compound on itself. Think of a 10 year horizon. Start investing for a mini-retirement or for a specific goal (like a home or the trip of a lifetime that is 10 years away, not 40 years away.)
Here’s the good news: now you can invest in companies that support your view of the world. This is called impact investing.
Today you can choose to invest in portfolios that give you a better return than a savings account and support your values. Pissed off at fracking? Invest in green tech. Frustrated by wage inequality? Invest in gender funds. Hate how we are destroying the oceans? Invest in companies that don’t contribute to environmental destruction.
Today’s generation has many more options. Impact investing is making a difference in our world, and making people wealthy in the process.
Here’s another bonus: if donation is not in the financial cards for you right now, impact investing is another way to put money in your pocket while also having a positive impact. That’s because when you impact invest, you are buying equity in companies that are changing the world.
Start investing, even if you have debt
Some people think they don’t have enough money to start investing because they have consumer debt or student loans. Paying down your debt is crucial. But the thing is, developing good money habits also takes time. It is important to pay yourself first. This is why we believe in saving (emergency fund), paying down debt and investing simultaneously, right from the start.
Developing good money habits takes time. The amount you invest doesn’t matter. It is the act of starting that matters most.
The amount you invest doesn’t matter. It is the act of starting that matters. Automating it and staying consistent matters. Setting something aside for your future self, no matter how small, matters. To win the money game, you need to set yourself up with a good money mindset, right from the start.
Think about how good you will feel when you create a little account that is just for you and your future. Start small and start now. It only takes $50 to open an impact investing account. In fact, our partner Swell Investing will even match all WellWallet readers with an additional $50 investment when you sign up.
Become an investor. Start investing today.
Our partners at Swell Investing have agreed to give all WellWallet readers $50 toward their portfolio when you open an account. You can start impact investing with as little as $50. That means when you put in $50, you’ll get another $50 from Swell Investing. Use the code WELLWALLET when you set up your account. To learn more, read our in-depth review of Swell Investing.
Jump in. You don’t have to think about retirement to start investing for your future. In a few months, you’ll look back and be glad you started investing.