Encouraging Your Teen to Consider Saving for Retirement

Saving for Retirement as a Teen Can Produce Great Dividends in the Future

It’s never too early to start saving for retirement. You may have heard many people utter that statement before, but it’s likely that few people think about applying it to teenagers. While teens are generally more focused on the here and now, now is a great time to encourage your teen to think about starting their retirement savings now so they can secure their future.

Most teenagers, especially those with part-time jobs have the benefit of most of their income being disposable. That doesn’t last forever, so it’s a great idea for teenagers to start planning for the future by putting some of that money into a retirement savings account.

3 Reasons Teens Should Start Saving for Retirement

Simply put, the earlier you save, the more money you will likely have in the future. Following are three reasons why it’s a good idea to start saving now by putting money in an individual retirement account or Roth IRA.

• Create a habit of saving — The earlier you learn to save, the more likely it is to become a long-lasting habit. If you see your money start to grow in a retirement account as a teenager, you may be more inclined to participate in an employer-sponsored 401(k) once you start your career.

• Learn time value of money — The longer money stays invested, earning interest, the more it will be worth in the future. For example, $2,000 invested in a retirement account at age 15, assuming a modest rate of return of 2.5%  with a monthly contribution of $100 will be worth $126,290 by age 65. The same amount with the same rate of return invested at age 25 will be worth $87,773.

• Flexibility — The earlier you start saving for retirement, the more flexibility you will have with your investments. If you choose to focus on higher risk investments that can yield higher returns on your money, you will have more time to recover losses if stocks drop due to economic conditions.

To learn more about saving for retirement, contact a Northwest Bank Personal Banker today!  You can also use our Financial Calculators to help determine - Which retirement account might be best for me, a Traditional IRA or a Roth IRA? How much will my Traditional IRA be worth at retirement?  

Northwest Bank offers a variety of terms with competitive rates, take advantage of the Traditional IRA, Roth IRA or a Health Savings Plan. You may even decide that a mixture of these savings plans best suits your needs. Each product is governed by its own regulations as set fourth by Congress and the IRS. We suggest you contact your tax advisor to determine which plan best fits your needs.