Saving for retirement may not feel like a priority if you’re younger than 35. After all, retirement is decades away, and if your employer doesn’t offer a retirement plan, there may be even less incentive for you to start saving. Often, millennials have an immediacy bias, which can hurt their retirement plans. However, there are several small steps millennials can take today that will benefit their future.

Fortunately, time is a great ally. The earlier millennials start investing for their future, the more time their investments have to grow and compound. If you put off retirement savings until later in life, as many baby boomers did, you may end up having to devote huge chunks of income just to be able to retire. There are several ways that millennials can set themselves up for retirement early in their careers.

First, reject stereotypes that the media places on millennials.

It is said that millennials are wary of investing and are better spenders than savers. As the media tells it, millennials are laden with debt, too pessimistic, and scared to invest their savings after seeing what happened to family members during the 2007-2008 financial crisis. However, savers of all ages have been traumatized by recent financial crises, and student loans bog down many generations.

A recent Gallup poll found that only 55% of American households had money invested in the stock market. That compares to more than 62% of households that were invested before the 2008 financial crisis. Worse than that, studies suggest about 69% of Americans have less than $1,000 in savings. Therefore, people of all ages are struggling to save money and have little confidence in the stock market.

Therefore, it is essential to start investing despite stereotypes. Everyone can save and invest at any age, and it’s best to get started early.

There’s no better time than the present to start saving.

As a young person, time is on your side when it comes to investing. This is due to compounding interest. Compounding interest will help the money that you invest today grow more over time. Your 401(k), Roth IRA, or other retirement accounts will accrue compounding interest.

Whether or not your employer sponsors a retirement plan, you should make saving a priority by developing a save-first mentality. A save-first mentality implies that you choose to put your money toward savings and investments before spending it, rather than investing or saving what is leftover at the end of a month or pay period.

Instead of depositing your income in a checking account, direct all your income to a savings account. Then, make a monthly transfer for your recurring bills and budgeted discretionary spending. With this method, you are forced to make additional transfers from savings to checking when you go over budget. By doing so, you’ll have extra time to evaluate “why” you are spending additional money.

The save-first mentality will help you develop other positive financial habits, such as building a savings account. With your additional savings, you’ll have the freedom to invest.

Invest some or most of what you save.

Investing your money is crucial because it gives you the potential to grow your money with compounding interest over time. It would help if you shifted your mindset to see everything you do with money as an investment. The value of a dollar fluctuates daily, and over time inflation decreases that same dollar’s ability to purchase goods and services. Therefore, saving, investing, and even buying items be an investment.

Every investment involves both risk and reward. The more reward we seek, the more risk we must take, and vice versa.

In our current low-interest-rate environment, conservative investments such as savings accounts and bonds don’t generate a large return on your investment. For a better chance at growing your investments, you’ll have to take on more risk. Riskier investments include equities, stocks, and more.

The key is finding the right balance of how much risk you’re comfortable taking. We call this the “risk comfort zone.” When investing your hard-earned money, it’s essential to have realistic expectations of how much risk you are taking to achieve a desired potential return. You should speak with your financial advisor to see the best way to allocate your investments and decide if you should change how you allocate your retirement accounts.

Compounding interest has a profound effect.

As mentioned above, time is on your side when it comes to investing. Compounding interest has a profound effect on your savings because each year, your money gains interest. Then, that interest gets added to the balance, and the total amount gains interest.

For example, suppose you want to achieve $1 million in savings. If you invest $450 every month for the next 40 years, you would have invested $216,000. However, at a 6.5% compounding interest rate, your money would grow to $1,010,059 in those 40 years. If you start investing $450 per month at age 25 and let it grow until you retire at 65, you will likely retire a millionaire.

If you wait until age 35 to start investing $450 per month, you will have invested $162,000, but that money would only have grown to $496,741. Therefore, you should start investing as early as possible to take advantage of compounding interest.

Friends and family may not know it all.

Often, young people’s primary source for financial advice is family and friends. While the advice they provide is typically well-meaning, most people giving this advice aren’t financial professionals. The information they provide can be biased. Therefore, you should respect the people closest to you, but be sure to take their advice with a grain of salt. The people who are giving you advice may or may not be familiar with investing or aware of other strategies that could be most helpful.

Expect your investments to fluctuate.

Investing requires a significant amount of risk-taking. Regardless of how risky your investments are, it is important to stay invested over time. Global markets will go up and down, sometimes by large amounts over short periods. Just remember, there has never been a 20-year period in which the market has lost value. Therefore, you should make investment decisions for the long-term.

With that in mind, you should also plan to diversify your investments. You may want to review your asset allocations over time to ensure that your money is invested in growing markets. It is wise to talk with your financial advisor about market projections and allocate your assets best.

The bottom line

Young people should start investing early and well. It is crucial to take advantage of compounding interest rates and to invest consistently over time. This way, your money will grow for a long time before you retire.

When it comes to deciding where to invest, it is wise to work with a financial professional such as a financial planner or advisor. The advisors and planners at Navalign are here to help you prioritize your life goals and plan your financial goals accordingly.