Common mistakes young people make when planning for retirement

Planning for retirement while you're young is the best way to safeguard your future plans. It's also a good way to avoid financial pitfalls along the way. Before you get started, or if you have children who are at an age where they should be considering how they're going to fund their retirement years, here are some common mistakes to avoid.

Common mistakes young people make when planning for retirement

Mistake #1: Waiting too long

Many young people feel that retirement is something they don't have to worry about until they're in their 30s or 40s. Although some financial experts would suggest planning during that age range, many are now beginning to see the importance of starting even earlier.

  • Planning early for retirement ensures that you'll plan with less stress. You'll also have time to plan out certain life events and begin saving for them. Ultimately, waiting too long could put you under immense pressure.

Mistake #2: Going into credit debt

As mentioned above, planning early comes with a host of benefits. However, there is one mistake that could wipe them all out: credit debt.

What is credit debt?
When you graduate from high school or university, your mailbox will swell with offers from credit card companies.

  • The credit limits that these cards offer could be a source of temptation when you're starting in the workforce and have a low income or student loan debt. The next thing you know, you'll have multiple cards all maxed to their limits and collecting interest each month.
  • Since you didn't plan for this debt – and no one does – your entire retirement plan may potentially have to be rehashed to pay off these cards.

Mistake #3: Not having a savings account

This is perhaps one of the most common mistakes people make. Not having a savings account can lead to financial stress and credit debt before reaching the age of retirement.

  • If you decide to plan your retirement at a young age, it helps to start putting money away the moment you make your plan. Decide how much money you need to retire and how much you need to put into your savings account each month to reach that goal.

After you've figured out how much you need to save every month, begin recalculating your living expenses and finances, minus the amount you'll be putting away. If you don't, you may under-budget each month and end up spending your retirement money without realizing it.

Mistake #4: Not planning for eventualities

No one can plan for everything but you can plan for things that are likely to happen, such as:

  • If you're unmarried now but you know you'd like to get married in the future, plan for wedding expenses.
  • If you want to have children, buy a car, or perhaps a house, you should start putting money aside for these costs.

By planning for these big life events in advance you're not left recalculating your expenses at the last minute.

You're never too young

You're never too young to start planning for retirement. And, as these tips point out, starting early is a great way to keep your finances in order all the way to retirement while also keeping your money woes to a minimum.

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