A recent study conducted by TD Ameritrade revealed some very interesting insights into how the millennial generation views money, and possessions. In the limited amount of space I’m given for this column, I won’t be able to go into all of them. However, I felt a couple of takeaways from the survey were worth digging into.

The statistic, that came out of this study, that absolutely blew me away was that the majority of Millennials expect to start saving for retirement at age 36 and hope to retire by 53.  When I first read that statement I thought it had to be an error. Surely, the majority of Millennials don’t believe they will be able to save enough in 17 years to live for another 50-60 years. After reading it a second time, I came to the realization that we, as a society, have done a very poor job educating our young people about how money works.

The rules of retirement saving are pretty simple, save early, save often, save more than you think you will need. However, saving alone will not ensure you can retire comfortably. The real magic happens when those funds you have saved are given time to grow through investing.  Albert Einstein once called the law of compound interest the “eighth wonder of the world” because of the amazing way it can bring exponential growth to your account balance. However, the secret to making compound interest work is to provide it lots and lots of time.

For example, let’s say a person invests $5,000 a year from age 25 to 35 and then stops saving. Assuming a 7% annual rate, that person at age 65 will have $602,070 after only saving $50,000. However, let’s say that same person waits until he is 35 to start saving and saves $5,000 every year until they reach age 65. Despite saving three times as much money over the course of their life, they will only have $540,741 at age 65. The reason is because of compound interest. Money needs time more than anything else to grow. That’s why it’s so important to start saving for retirement early.

If you don’t believe me, ask any person struggling in retirement what their biggest regret is, and I bet, more often than not, they will tell you not saving enough early in life. Luckily, according to this same survey, 7 in 10 Millennials see themselves as “savers” rather than “spenders”. Many have seen the effects materialism and debt have had on their parents and grandparents and don’t want to make the same mistakes. However, being part of the generation who experienced the market crash of 2008 firsthand, many have an instinctual distrust of Wall Street, which is part of the reason less than half of Millennials have any money invested in the market.

If Millennials (or anyone else for that matter) intend to retire as soon as they hope to, these two elements of retirement planning will need to improve. They will have to save more money earlier, and they will have to accept more market risk. Without both the likelihood of success will be greatly reduced.

As I conclude please don’t think I’m attacking the millennial generation. After all, I am part of it. I just want to make sure every generation understands the importance of having a plan for their finances so they can get the most out of them. Simply hoping for something doesn’t make it happen. If you’re someone who is hoping to retire early, but not sure if you’re doing all the right things, we can help.  For over 20 years Stewardship Capital has helped hard working people in our community reach their retirement goals, and we can help you or a loved one too.