Start Investing Early in Your Career

If youre fresh out of college and starting a new career, investing for your retirement may be the farthest thing from your mind. But dont be so shortsighted! Given the somewhat tenuous state of the Social Security system, youre may have to rely on yourself to provide for your retirement. And if youd like to retire sometime before youre 80 years old, you need to start investing as soon as possible.

There are a number of reasons to start investing early. First, you may be lucky enough to receive matching contributions from your employer. The way it usually works is you commit to put a certain percentage of your salary into a retirement account and your employer rewards you by putting in a certain percentage as well. Now there are very few times in life when youll get free money like this, so if your employer offers this perk, jump on the bandwagon immediately!

Second, the longer your money stays in your account, the more you stand to gain. You expect your investment to grow, maybe by as much as 8-10 if youve invested in CDs or bonds. But whats cool is that as your money is growing, youre earning interest on both the original amount of your investment and the amount of interest its earned. This is called compounding interest. If you can leave the money in your account for 20-30 years or so until your retirement, youll likely find that the amount youve earned on your interest is greater than the amount you originally contributed!

So lets look at a scenario from The Motley Fool Investment Guide for Teens:

Marge saves up her money and invests $1,000 each year from the time shes 15 until she reaches age 30, making her total investment $15,000 over 15 years. Homer doesnt start investing until the time hes 35, when he panics over whether or not hell be able to retire. He puts aside $5,000 each year until he retires at age 65, making his total investment $150,000 over 30 years. Assuming each has earned an 11% return on their investment, Marge will have $1,473,172 in her account when she reaches 65, compared with the $1,104,566 in Homers account when he hits the same age.

Pretty crazy, huh? Marge stops investing at age 30 and puts in $135,000 less than Homer and still beats him by $300,000 when theyre ready to retire. Thats the power of time and compounding interest in investing.

When youre younger, youre also able to take more risks with your money and chase the stocks that might make you rich. You can take a chance on the next big Microsoft, even if it winds up being a poor investment. If youre 25 and wipe out your portfolio on a bad stock, youll still be able to make it up in the long run. But if youre 55, you cant be as aggressive with your investments youll need to keep your money safe for retirement.

Clearly, investing early is a great way to secure your financial future. Ask your employers benefits coordinator if your company offers any matching benefits and enroll immediately if they do. If not, you can open up a private IRA account and start saving on your own. It can be a stretch money can be tight when youre just starting out and setting aside money for retirement can seem unnecessary. But look to the future and think about the type of retirement youd like to have. After all, which would you prefer? Spending your golden years still working or slipping away to a tropical paradise knowing that youre financial needs are taken care of?

This article was published by Sarah Russell on Smart Young Money a collection of money management resources for teens and young adults. For great information on using credit, managing debt and more for young people, visit http://www.smartyoungmoney.com.Belle Blog49645
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