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.
