Where do you see yourself in five years?
Some of us might be able to give a clear answer, but many of us don’t know if we’ll be working for the same company (or even the same industry), if we’ll be living in the same town or city, if we’ll be single or partnered, and so on.
This makes it hard to plan ahead, financially. Is it worth saving up for a down payment if you’re currently living in a city where house prices are far beyond what you can ever hope to reach? Is it foolhardy to save for a wedding, or for the cost of raising future children, when you aren’t even dating anyone right now—and aren’t even sure if you want marriage or children?
For those of us who are struggling with debt and student loans, and/or those of us who might have experienced repeated layoffs, low wages, stagnant salaries, or underemployment, the very concept of saving for a long-term financial goal might feel risky—or ridiculous. It’s hard to plan for the future when you’re trying to figure out how to pay for today.
If any of this sounds like you, you’re not alone. As CNBC reports:
Twenty-five percent of millennials don’t plan on marrying, and 30 percent don’t count on having a child, according to TD Ameritrade’s “2018 Millennial and Money Survey.”
In addition to cultural changes, the economic climate has blown away milestones for many young people. As wages have sputtered, child care, medical and education expenses soar.
Nearly 30 percent of millennials don’t expect to retire, and a quarter say they’ll never buy a house, the TD research found. “Most millennials don’t believe there’s any long-term security anymore,” Brobeck said.
However, CNBC advises millennials to start saving anyway. Even if you can only save a little bit every month. Even if you don’t know how you’ll spend the money. Even if you don’t ever imagine yourself buying a home or paying for a wedding. Even if you don’t think this economy will ever let you retire.
Why? Because saving money now, especially when you’re young, will pay off in the form of compound interest—especially when you invest some of that money instead of stashing it all in a savings account. In a world where many of us rarely get a raise that does more than cover the cost of inflation, investing is often one of the best ways to increase our net worth, long-term. (My Vanguard investments, which currently total $83,878.64, grew by $1,896.37 in the past month.)
Saving money now will also give you the freedom to make choices in the future. Maybe you will want to buy a house after all. Maybe you’ll want to take some time off for the birth of a child (time you won’t get otherwise, with our current parental leave policies), or take some time off to travel the world. Maybe you’ll even use some of those savings when you retire someday.
If you need any more convincing on the benefits of saving early, CNBC does the math:
If you invested $5,500 a year for retirement between ages 25 to 35, you’d have nearly $620,000 waiting for you at 65. That’s more than you’d have if you saved that same amount every year from 35 to 65 (which would be around $556,000).
Sure, that retirement money might not be accessible until age 59 1/2, but there are plenty of investment options besides retirement accounts—and the math of compound returns works the same way whether you open a brokerage account or work with a roboadvisor or use one of the myriad personal investing tools out there.
So I’ll ask you again: where do you see yourself in five years?
Or, more importantly: where do you see your money?