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What is the best age to start saving money?

According to CNBC, 70% of adults have less than $1,000 in their savings accounts. Let that first sentence sink in just a moment. That’s a startling number, and a problem that can usually be avoided with proper planning, and budgeting. So, the question is, what is the best age to start saving money? While there is a lot of information on the topic, a good rule of thumb is to start saving money when you start earning money, whether it’s cutting the neighbor’s grass at age 12, or delivering pizzas at 16, or even your first job out of college. When the paychecks start coming in, it is wise to pay yourself first.

Aside from the benefits of the actual money saved, learning to save early develops the habit that will hopefully stay with children throughout their lives. Saving teaches children the importance of goal-setting, patience and responsibility, as well as learning to live within their means. These skills will set them up for a better financial future, with better habits that will last a lifetime.

A great advantage of saving early is the power of compound interest. Compound interest can be thought of “interest on interest.” When you combine compound interest with the biggest advantage of saving young, time, your potential for accumulated savings by the time you retire is far more than putting off saving until later in life.

According to CNBC, retirement funds are looking equally bleak for Americans, with about half of U.S. families with zero retirement account savings. Retirement is one of those ideas that kids, teenagers and even young adults think is so far into the future that they don’t need to start saving yet.

As with any savings account, the sooner you begin saving, the more time your money has to grow. Each year’s gains can generate their own gains the next year, thanks again to compound interest. This example from CNN Money illustrates what a big difference starting young can make. “Say you start at age 25 and put aside $3,000 a year in a tax-deferred retirement account for 10 years – and then you stop saving – completely. By the time you reach 65, your $30,000 investment will have grown to more than $338,000, (assuming a 7% annual return), even though you didn’t contribute a dime beyond age 35. Now let’s say you put off saving until you turn 35, and then save $3,000 a year for 30 years. By the time you reach 65, you will have set aside $90,000 of your own money, but it will grow to only about $303,000, assuming the same 7% annual return.”

Whether saving in a retirement account or a regular savings account, the easiest way you can help yourself keep on track is to automate your savings. This is done simply with retirement plans at work; the money comes directly out of your paycheck and into your retirement account. The same can be true with other savings accounts. For instance, if you have an investment account with Gainplan, talk to your planner about making automatic contributions. The old saying is true about money, out of sight, out of mind.

The takeaway is this: The more you can save, the better. The earlier you can save, the better. Don’t get into the mindset that you will save more when you make more, or that you’ll start saving when you get a raise, pay off your credit cards, etc. Teach your children the importance of saving their hard-earned money and saving it early. Start now. In fact, start yesterday.


Gainplan LLC is a Registered Investment Adviser. This blog is solely for informational purposes and not a solicitation to invest. Advisory services are only offered to clients or prospective clients where Gainplan LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Gainplan LLC unless a client service agreement is in place. Please contact a financial advisory professional before making any investment.

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