Launch Global Education
Sparks blog: The key to building wealth? Start early.

by Mr. Michael Wagner

There are some topics in life that stick out from others. They fall under the heading of important life skills to master. These skills help us to make life better, easier, and more manageable. The topic we will focus on today is money. No matter where you are in the world, money is involved in some form or fashion in the daily aspect of our lives. Today, let’s look at the life skill of saving money for the future, specifically, retirement.

Saving for…retirement???

It is hard for me to mention the word retirement in its traditional sense because the true meaning of the term retirement is changing constantly. For these purposes, I will use the word retirement as a time when working a full-time job is not required for daily life survival.

Currently, the traditional retirement route is for individuals to reach a certain age (typically somewhere between 60 – 70 years old). In some countries, this is when a person will begin to receive government assistance. These amounts will vary greatly depending on the work history of the individual and the amount of money that is pre-determined. In other countries, it is expected that the person’s family will provide for the retired individual’s monetary needs.

There is one underlying issue that individuals must effectively manage when retiring: having an income stream to be able to survive on a day-to-day basis. Despite government assistance, it is usually not a system that wholly subsidizes total living expenses.  Therefore, whether you can count on government assistance or not, it is likely that some amount of additional income will be needed to live a comfortable lifestyle during the retirement years.
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But what if I will have a pension?

Another way some people obtain money during retirement is a company-sponsored pension. These types of programs tend to be awarded to those individuals working for a length of time and serve as a benefit for completing years of service. From the company’s pension fund, a predetermined amount of money will be paid to the individual monthly after retirement.

However, as time has gone by, employer-sponsored retirement pension programs have been eliminated in places like the U.S. and replaced with more personal self-directed retirement savings plans. This means that it is the sole responsibility of the individual to create their own self-funded retirement savings program instead. To create such a plan takes long-term planning, and I mean years and even decades, not days and weeks—long before an individual begins using it.

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Three simple things

There are three basic foundational points to successfully saving and accumulating money:

1.     Start Early

2.     Compound Interest

3.     Time

These three work in unison. The concept of compound interest is very simple – it is earning interest on interest. Or as I like to say, making money while you sleep. Albert Einstein once said, “The most powerful force in the universe is compound interest.” The concept of time goes hand in hand with compound interest because the longer the money has to make more money, the more money one will have in the end. Said another way, the longer a person has money saved and invested, the greater chance that money will grow and increase in value.

That brings us to starting early. The one controllable factor that individuals can manage is when they begin the saving process. The best way to do this is to build a habit early to set an amount of money aside each month to be used later in life for retirement. How early? I suggest now. The earlier one starts to set aside or save money the longer that money will have time to take advantage of compound interest, multiplying and growing.


Forming good habits

The idea here is plain and simple. The key to building wealth comes down to easy habit-forming behaviors that over time will build into a successful personal finance strategy. Whether you plan to supplement what you might receive from a pension plan or the government, to have money to travel and live well after you finish working, to retire at an earlier age, or to limit becoming a burden to your family members, your best plan is to start early.

It is as simple as that.

Mr. Michael J. Wagner

Michael Wagner, MAED is a founder and the Knowledge Pilot for Launch Education.  Mr. Mike is the author of Your Money Day One: How to Start Right and End Rich, a financial literacy guide for young adults, and has assisted hundreds of students around the world on their college pathways.