It’s better to save when you’re younger. I think most of us know that.
The problem is that being younger is the time when it’s hardest to save. One’s younger years are the time when pretty much everyone has a negative financial net worth: no assets and student loan debt, not to mention (most likely) credit card debt.
But we know instinctively that saving earlier means that we have not only more time to save, but also more time to let our money grow.
I was quite taken with a statistic I heard recently that is glib, easy for you to remember, and could be a good motivator to you no matter what your age.
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How to double your money
If you save $1 today, you can have $2 in 10 years.
Similarly, if you saved $1,000 today, you can have $2,000 in 10 years. Add or subtract zeros and you can do this all day.
I like this because it’s easy to remember. Double my money in a decade. Sounds easy.
You can play the game a little further if you want. You can have $4 in 20 years. Quadruple your money in two decades. This is fun.
30 years? If you guessed $8, you’d win a prize.
How we got here
Now, there are certain caveats to this. We’re assuming that you put that $1 or $1,000 (or whatever) in an account that returns a little over 7%.
Why 7%? Well, that’s just the Rule of 72 talking there. (If you don’t care about math, you don’t need to care about this though.)
Now, if you throw your money in a savings account (even a good one), you’re not going to get 7%.
But 7% isn’t unreasonable to obtain. Over the last 15 years the S&P 500 index has returned more than that each year (when taken as the average annual return, of course), and you can buy a fund that tracks that right now.
In other words, it’s not hard to make that double happen by using the markets. You don’t have to be slick or experienced. You don’t need to hire a robo-advisor. You just need to open an IRA, or similar brokerage account with any reputable company (I talk about how to do this with Vanguard, but you can choose the one you want).
How to get there
The difficulty is putting that $1 away. And there are so many reasons not to do that. Everywhere, people are having to do more with less: more bills, wages that haven’t risen, the allure of today (YOLO!) versus the desire for a pleasant tomorrow.
But while I don’t think that we should stop all of our desire to have a pleasant today in favor of an abstract future, luckily you don’t need to.
You can start small.
Start with what you have.
And in 10 years, you’ll have twice what you had before. Remember that.
What do you have today that you’d want to have twice of in a decade?
(Here’s my standard note about how past performance doesn’t guarantee future results. Markets can be volatile, and you shouldn’t expect that doubling of money as a guarantee.)