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Reasons to consider retirement planning for high school students

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

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. 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 (and your teen or young adult) see how retirement savings at 13 and beyond can lead to a wider range of options and improved financial security at 65.

  1. 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 twice your annual salary saved in a retirement fund by the time you’re 40 — and four 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. If your 15-year-old saves $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, a 25-year-old who saves the same amount will only have about $30,000 at retirement age.

  2. 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 they 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.

  3. 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.

  4. 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 .

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