In my first blog on millennials and saving, I discussed a few tips to help figure out what you are spending and ways to make saving easier and in my next millennial blog, I discussed a couple of the accounts at your disposal and how to maximize your money. In this section, I will cover the importance of implementing the strategies discussed now versus waiting.
When I was in middle school, I remember reading numerous fables. It seemed almost any life lesson could be taught through a fun fable. One of my favorites growing up was the story of the Maharaja of India and the palace wise man. The story goes:
“The Maharaja of India was so pleased with one of his palace wise men, who had invented the game of chess, that he offered him a reward of his own choosing. The wise man told his Master that he would like just one grain of rice on the first square of the chess board, double that number of grains of rice on the second square, and so on: double the number of grains of rice on each of the next 62 squares on the chess board. This seemed to the ruler to be a modest request, so he called for his servants to bring the rice. How surprised he was to find that the rice quickly covered the chess board, then filled the palace!”
This fable, which was used to teach compounding, was something I had not thought about in years. However, it came rushing back when a friend mentioned that she would start saving when she could contribute larger amounts.
Imagine for a second, that the chess board is your life and every box represents a year of your life. Now imagine that you have your retirement savings on that chess board. This means you have 62 years (assuming retirement is at age 62) to build up the money that will need to last you the rest of your life. Unfortunately for most millennials, the first 25 years of your life you most likely were not saving, which leaves only 37 boxes left on your chessboard of life. The longer you wait to start saving, the less time compounding has to work its magic.
For many young professionals, retirement still seems like such a long way off, but starting to develop good habits now will put you on the path to financial success.