Being a teenager is a footloose and carefree life with no worry in the world. Retirement is the last thing on your mind because, according to you, “That’s for middle-aged people, I haven’t even started working, what retirement should I plan!”  This is a general scenario with most teens, as you are unaware of the advantages of early saving and investments. Consider having time on your side. Some reasons why you think retirement planning isn’t for you –

I have a lot of time on hand –

There is no such thing as, I have a lot of time or even the right time to start saving for retirement. Each individual visualises his retirement in a different way and the retirement amount depends on that. If you start saving early, then you will have less catch-up pressure to deal with in your later years.

There are other priorities –

This is probably true, you may want to prioritize your higher education first, then as you go through life, there will be a house, car, etc that may become necessary. But, even if you are able to accommodate a small amount towards your retirement fund, it will help you work towards that goal.

I won’t be rich when I am young, why bother –

Building a fortune takes time, it doesn’t happen overnight. Remember, Rome wasn’t built in a day, cultivating lifelong financial skills like budgeting, saving, investing, setting goals, learning to live within your means, differentiating between wants and needs, can go a long way. Money management is an art that is cultivated and practiced over a period of time. The sooner you start, the more experienced you will be.

I don’t know how to go about it –

This could probably be true; your parents are there to guide you. You can use the money you get on your birthday, for finishing chores, helping in the neighbourhood, etc. to save and start on your retirement fund. As a young teen, you can acquaint yourself with compounding interest and it’s magic.

What is compounding interest?

Compound interest is the interest calculated on the principal amount invested and the accumulated interest. It’s also called interest on interest because the interest gets included to the principal year on year. Interest earns you more money and grows at a faster pace compared to simple interest which calculates interest only on the principal. Your money is working for you day in day out, it is often called the snowball effect, just like how a snowball keeps growing when rolling down a hill, your wealth also grows and picks up momentum year on year.

Compounding interest is like magic, when you put your money in compound interest earning and leave it alone, your money will grow and when you invest more in it, then the money is working for you and growing year on year. Now you are earning interest not only on the principal amount, you are earning interest on your interest.

Why plan for retirement?

At a young age, you have lesser responsibilities and more time on hand. You have the freedom to make riskier choices and even if you do make mistakes, you have time to rebuild. If you look at it from the perspective of value, with a longer time horizon and robust earning capability, you have the power to build your fund for retirement, business, and any other dream you have. The sooner you set your goals, secure your finances and achieve financial independence, the sooner you can retire. Get the help of an expert, talk to your parents and claim the power of financial literacy to your utmost advantage.