Happy New Year!

It’s easy to live in the now, and never consider the distant future when you will need to retire. There are also plenty of arguments for putting off saving for retirement until later:

• I cannot afford it;
• I have plenty of time;
• The government will look after me ; and worst of all
• My children will look after me.

The easiest way to save, is to have the money taken away from you before it hits your bank account. Saving into a pension scheme (a 401k in the USA, or a Stakeholder Pension in the UK) is the arguably the best way to get saving.

The earlier you start saving for retirement, the more time your money has to grow. This should be obvious, but the power of compound interest is such that it really makes a massive difference:

For example, if you save $100 at 8% interest for 45 years, that will grow to just under $3,200. If you save $100 at 8% interest for 35 years (you wait ten years before saving it), if will only grow to just under $1,500. Waiting ten years to save towards your pension, in this case, loses you more than half of the potential earnings.

Of course you have other expenditure to consider when you’re just out of school or college. And you should not save for retirement at the expense of eating or other necessities. But do consider making this new year’s resolution: Add a couple of percent to the amount of money that is taken from your salary and put into your pension. You’ll hardly notice it now, but it could make all the difference when the time finally comes.

If you struggle with money on a day-to-day basis, I am friends with the author of “The Finance Gym”, Stacey Powell. I recommend this book – buy it here to support Code and Copy.