Father and teenager reviewing retirement information.

Reasons to consider retirement planning for high school students

You have a lot to gain by learning how to save money as a teen.

Conventional wisdom says the best time to start saving for retirement is when you first get a full-time job. The logic of time says something different: The longer your retirement savings grow, the more opportunity you have to build wealth. Nearly 18% of students aged 16-19 have jobs. If you’re one of them, consider putting time on your side as a teen by opening an IRA. There's a bonus, too: Learning how to save money as a teen can lead to a life-long saving habit.

Not convinced? We dive deeper into four common objections to help you see how retirement savings at 13 and beyond can lead to a wider range of options and improved financial security at 65.

I have plenty of time

According to the experts, there's no such thing as too much time to save for retirement, especially to meet benchmark savings goals. Take one recommendation: Have three times your annual salary saved in a retirement fund by the time you’re 40 — and five times your salary when you’re 50. Start saving earlier and there’ll be less catch-up pressure in your later years.

Here's an example to consider: At 15, if you save $500 in a Roth IRA for four years, that account (assuming a 7% growth rate) will grow into about $55,000 at retirement age. However, if you save the same amount at 25, you will only have about $30,000 at retirement age.

I have other priorities

This is perhaps the trickiest hurdle to navigate when considering retirement savings at a very early age and learning how to save money as a teen. But doing so can help institute a multi-pronged approach to money management. Teens should, of course, save for goals such as a car and you may also need or want to save for higher education expenses. But even accommodating room for a very small addition to a retirement fund can help focus on a goal mindset. This is a time of life when not having other expenses like rent, a mortgage or vehicle loan can help you put money toward retirement.

I won't be wealthy as a young person, so it doesn't matter

That might be true — but building wealth over a lifetime takes years and dedication. Creating a budget, setting goals, living within one's means and discerning between wants and needs are lifelong financial skills. If large amounts seem overwhelming, start small and build a solid financial foundation with basic budgeting skills.

I don't know how to do it

Creating a Roth IRA requires a caregiver's assistance and earned income, even from gigs such as babysitting or lawn mowing. And, with a Roth IRA specifically, you will not owe taxes when you withdraw it for retirement after age 59½.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.

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