Why you should plan your retirement in your 20s
After turning 18 you are legally an adult, responsible for yourself and your finances. You will likely have your first jobs, work full time and begin your first career steps in the years following. In your 20s, you can define how you proceed financially – whether you will be a spender or a saver, a budgeter or a paycheck-to-paycheck worker. Whatever your relationship with money, there is one thing that everyone should put into practice financially from the very beginning, and that is planning a pension.
A buffer for emergencies
Unsuspected things could happen to you at any time, especially at work if your job involves any type of manual or physical labour. For jobs with a higher risk factor, ensure you wear appropriate equipment at all times. Consider purchasing cheap contractor liability insurance, so you are protected if something does happen. Accidents at work can leave you in financial crisis, but with insurance, you can rest easy that any accident will not affect your future retirement plans.
Freedom in later life
Having constant and generous amounts of money coming in during later life will ensure a good quality of life for you and the people around you. With sufficient pension funds, you can travel to places you have always dreamed to go, and treat your loved ones to things big and small.
By beginning to save money in your 20s, you give yourself more time to earn more interest on your savings. Interest rates generally operate per annum so by adding more years to a savings account you will have more time to accumulate more money by the time you retire.
Little contributions add up to a lot
Saving from an early age will mean only small amounts of money are set aside each paycheck. Saving when you're older might mean larger proportions of your wage have to be put in your pension because there is less there already. Having a hearty pension is achievable in so many jobs, so try and define the creation of this at a young age.
Pensions are the most tax efficient way to save money. This is partly because you are locking it away to accumulate more money instead of dipping in and out of an account, but also because it provides advantages with tax. Depending on where you live, employer contributions to pensions can be worth more than an individual moving money into a savings account, for instance.
In your 20s, life is full of exciting opportunity. It is tempting to throw money towards the next travelling destination or spontaneously spend it on things you like in the moment. Yet if you begin preparation for your pension early, you will ensure peace of mind and opportunities in later life, and perhaps even an early retirement too.