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Let’s face it, saving for the future can be hard. It’s often tough to prioritize it over more immediate needs. Or it can’t be a priority, given your job status, family situation, or extenuating circumstance. Perhaps it seems futile, considering how much you’ll need in the end. Or, you want to start that 401(k), but you’re daunted by the prospect of losing money in an unpredictable stock market. Maybe you are saving, but it’s taking immense self-control not to spend the money instead. No matter the circumstance, it can be challenging to build up the savings you’re going to need for retirement, your kids’ college education, or an unexpected emergency. So here’s some math to motivate you. First, the earlier you get started, the better. And not only because you’ll have more time to invest, but because the longer you’re in the market, the more compound returns can work in your favor. Making regular contributions through your employer’s 401(k) plan or to an individual retirement account (IRA) demonstrates the power we’re talking about. As this chart shows, starting at age 20 rather than 35 could mean hundreds of thousands of additional dollars by age 65 — even if the 20-year-old contributes half as much each month. Second, the U.S. stock market tends to appreciate over time. The S&P 500 Index, the broadest measure of the market, has delivered an average return of roughly 10% over the long term (or 6%-7% when adjusted for inflation). And, despite the market swings in the first quarter of this year, U.S. workers contributed an unprecedented share of their paychecks to their 401(k)s — an average of 9.5%, according to Fidelity Investments, which has over 24 million plan participants. Third, consider this stark divide: The number of 401(k)-created millionaires with Fidelity jumped 27% to 537,000 in 2024. And yet, 40% of U.S. adults don’t have any money invested in a retirement savings plan, according to an April Gallup poll. So what? Your bills, fears, and countless other priorities can interfere with your long-term financial goals. But the cliches are true: Even a little goes a long way when you use a high-yield savings account, 529 college savings plan, or retirement account. And the longer you’re invested, the more likely you are to earn a return. Like they say, the best day to start investing was yesterday; the second best day is today.Related Reading
• When It Comes to Saving, Gen Z Asks: 'What’s the Point?' That's Dangerous, Expert Says (CNBC)
• How Much Do You Need to Retire? Here’s the Truth (SoFi)
• How Parents Can Balance Both Retirement and College Saving (InvestmentNews video)
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