Financial literacy is something many people are unfamiliar with because it isn’t usually taught in schools unless perhaps you studied a finance course. People are typically taught to get an education and find a job, but they aren’t educated on the importance of saving or investing to secure your financial future. It is, however, important that you think about this and ways that you can work towards a level of financial freedom. If not, you may find that you spend your life in a rat race that consists of working hard only to pay bills and barely get by. In light of this, you will find three reasons to begin thinking about securing your finances early in this article.
Retirement may seem extremely far away but should not be overlooked. Planning for how you’re going to survive financially when you retire is something that you should begin doing as early as possible. Even if you have a company pension or social security, the reality is, it may not be enough to sustain you through your post-retirement years. For this reason, you should begin retirement planning which will require skillful planning and investment. There are a number of ways that you can begin planning which include opening a savings account or tax-advantaged saving plan like an IRA with which you can usually start saving with as little as $1,000. You can set up a direct debit which will ensure the funds go directly to your account if you’re likely to spend it before you save it. You should note that the costs of healthcare are likely to go up after retirement, so that needs to be factored into your savings as well. It is said that you’ll need an estimated 70% of your pre-retirement income in order to live comfortably, so take that into consideration when calculating how much you want to save.
If you happen to have any dependents, it is important to think about investing in their future. Although it isn’t a prerequisite to set aside savings or an inheritance for your children, it is something that can give them an advantage in life. For instance, you may decide that you want to invest in their education to save them the financial strain of having to pay for university via student loans. Beyond school, you could also set aside money or investments that give them the flexibility to use it to achieve goals, fund a business, or even travel the world. Some ways to invest in your kids include saving tax returns, setting up a custodial brokerage account in your child’s name, a 529 plan, trust, or cash-value life insurance policy. All of these things should ensure that if you aren’t around, your children will be well taken care of.
Financial security is one of the primary reasons you should think about investing. A job can go at any time and sometimes, it can be extremely difficult to find another. For this reason, if you have spare cash, you should think about ways to invest that money to create a more sustainable form of income. You could consider betterment or wealthfront if you aren’t too conversant with investing and need financial advice or guidance. Without security, it is harder to plan, and it can also leave you vulnerable to poverty in years to come. This should be enough of a reason to start earlier as opposed to later.
Investing during the earlier years of your life can seem difficult or unnecessary, especially if you’re living from mouth to hand. It is, however, better to use the strength that you have now to work both smart and hard in preparation for retirement years. You may not have the same energy then, and it’s also a time that you should be resting and enjoying many years of labor as opposed to working. For this reason, you should begin taking steps towards securing the years of retirement which are closer than you think.