By zp7op | Contributor
Understanding the Importance of Retirement for Teens
For teenagers, the concept of retirement might feel far off, but it’s never too early to begin saving for the future. Building good financial habits early on is crucial; the earlier kids start saving and learning about investing, the less they will worry about financial matters when they eventually retire.
According to the Achievement Teens & Retirement Survey conducted by Wakefield Research for Junior Achievement and MissionSquare Retirement’s Foundation, many teens are considering retirement. Among young adults aged 13-18 surveyed, 83% have contemplated their future retirement, and 78% are confident that they will retire comfortably. However, only 60% understand retirement to be about relying on savings and investments after leaving work, with some viewing it as an opportunity for extended travel, studying, illness recovery, or family care.
“This research shows retirement is more top-of-mind for teens than one might think,” said Tim Greinert, president of Junior Achievement USA. “While young people have given retirement planning some thought, it’s clear they still require guidance on how to approach it effectively.”
Given that nearly half of U.S. households (46%) report having nothing saved for retirement according to the Survey of Consumer Finances, it’s vital for teens to take proactive steps towards saving and investing to get a head start on a secure retirement.
Key Steps for Teens to Start Saving for Retirement
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Start now.
The earlier you begin, the more time you have for your savings and investments to grow. Even if your contributions are small during your teenage and early adult years, they can make a significant difference in the long run. -
Pay yourself first.
Whether it’s through a dedicated savings account or an employer-sponsored retirement plan, set aside a percentage of each paycheck. Then, focus on spending only on necessary and desired items. -
Invest what you save.
If you are not saving a substantial amount, it’s essential to invest your savings to help increase their value. The survey showed that teens consider investing in stocks and bonds—often with the help of a financial advisor (45%) or through online research (38%), as well as buying real estate or property (30%), and investing in cryptocurrency or non-fungible tokens (15%) as effective retirement strategies. -
Find the right balance between investment risk and potential return.
The best approach will align with your investment goals and the level of risk you can tolerate. The longer your investment horizon, the greater the risk you can usually manage. -
Spread savings across different types of investments.
Diversifying your investments helps manage risk. While some investments may experience downturns, others might remain stable or even continue to grow. - Stick with your investing plan.
Try not to make decisions driven by emotions or attempts to time market fluctuations. Instead, concentrate on achieving your goals over time.
“The fact that so many young adults in the early stages of their careers are aware of various investment strategies is encouraging news,” said Deanna Santana, president of MissionSquare Foundation. “As we navigate through life, our investment strategies, economic conditions, and priorities will evolve, making retirement planning an ongoing necessity for both teens and adults.”
For more tips on future planning and achieving financial success, visit ja.org and missionsq.org.
Photo courtesy of Shutterstock
