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One Reader’s Reasoning on Why Younger People Don’t Save
By JLP | September 26, 2008
I want to highlight this comment I received regarding why young people aren’t saving money (edited slightly):
I’m 27 and I can tell you really simply why we are not investing.
1. Since the day we graduated we’ve seen nothing but bad news. Huge tech crash, current crash. We’re not even back to where we were almost 10 years ago.
2. We have huge student loans to pay back.
3. Finally got out of college in 2004, saved as much as possible and am currently underwater…may as well have spent that extra money.
4. There are no solid investment vehicles that are even matching inflation right now.
5. We want to start families soon and need short-term funds, not long-term retirement funds.
6. We don’t really have much trust in our country. Frankly, I don’t think the US is really #1 anymore and our economy will only decline in the long run unless we are willing to tackle education’s inadequacies, stop giving money for oil to countries that hate us, and truly address the issue of consumerism.
We don’t see the market as a stable investment for the near future and would rather sit on cash and then get in either in the US once we balance out or elsewhere if my dollars are still worth anything.
I know firsthand how hard it is to get on your feet after you graduate from college and are just starting out in life. It is tough to think about retirement planning when you’re barely making ends meet. That said, most of those reasons are really nothing but excuses. Let’s look at each one:
1. Since the day we graduated we’ve seen nothing but bad news. Huge tech crash, current crash. We’re not even back to where we were almost 10 years ago.
Tell me one generation that didn’t experience bad news. Bad news is part of life. We go through tough times all the time. It’s nothing new. Use those tough times as buying opportunities since asset prices are typically lower during the bad times than they are during the good times.
2. We have huge student loans to pay back.
Figure out how much you owe and map out a plan to pay them back.
3. Finally got out of college in 2004, saved as much as possible and am currently underwater…may as well have spent that extra money.
Please don’t think this way. Instead, think about it this way: spending that extra money would have only put you further into the hole. It took my wife and I several years to get above water.
4. There are no solid investment vehicles that are even matching inflation right now.
Investments fall in and out of favor. Stocks are suffering right now. However, over the long run, stocks are superior inflation-beaters. Don’t base your long-term projections on short-term performance.
5. We want to start families soon and need short-term funds, not long-term retirement funds.
With proper planning you can have both. It’s extremely important to take advantage of the one thing you have on your side: TIME! Start out by putting a 3-6% of your salary into your 401(k). Once you get used to it, you won’t miss the money.
Saving for retirement when you’re trying to start a family will require some sacrifice. But, it is well worth it. The absolute BEST thing my wife and I did was to start putting money into her 401(k).
6. We don’t really have much trust in our country.
What? The greatest country in the world? Sure, we have problems but this is still a great place to live. Even if you don’t trust our country, what else are you going to do? Go live somewhere else?
Bottom line: it takes patience and sacrifice to get ahead.
I appreciate this reader’s honesty even if I don’t necessarily agree with them.
Topics: Basics, Financial Planning |