When people imagine saving for retirement, generally the idea that people have is that you can’t start saving until you’ve landed a steady full-time job that has a retirement plan tied to it. In reality though, the earlier you can start saving the better off you’re going to be. You’ll save more money for retirement, and you’ll learn a lot of different life skills that can be used within other aspects of your life.
When investing in an IRA, it is important to build up good saving habits so you can make the maximum contribution each year. By learning how to save like this at a younger age, teens are more likely to implement smarter saving habits in their own lives. This is a great way to learn responsible spending rather the impulsive spending. Another good lesson that Roth IRAs can teach is about basic compounded interest. This is an incredibly common interest that banks and other financial institutions use. It is what’s used in other savings accounts and loans as well.
If you know how IRAs work earlier on, it is a lot easier to catch mistakes further down the road. Managing an IRA can teach teenagers how to keep track of their money and how it is changing over time. By learning to take care of your retirement funds, teenagers can also start good habits for their accounts if they decide to get a credit or debit card down the road. They can also learn how to prepare other savings for college or paying off college before they actually get to college. This is smart if they are trying to pay of student loans right after college.
Along with those life lessons, there is a huge increase in the amount of money you’ll have at retirement. If a teen were to start investing the maximum contribution in a Roth IRA at the age of 19, they could potentially be increasing their retirement fund by more than a third of a million dollars. And there isn’t anything stopping you from investing even earlier to get a bigger head start. It’s especially good if they learn other ways to invest their money at a young age so when the opportunity becomes available, they can have other opportunities available to them.
Starting a Roth IRA may seem intimidating at first. However, there are so many ways to learn how to navigate through the accounts, and there are people that want to help you invest your money in the most positive way possible. Even if you’re starting off small, the funds you earn from a part time summer job could be what eventually sets you up to live comfortably at your retirement. It is important to remember that the money you’re contributing towards your retirement should stay there until after you’re 59 ½ years old. Early withdraws have a penalty and you’ll be losing money, so it’s better to have a separate emergency fund to not have to worry about that penalty.