Save while you’re young

There are a million reasons most twentysomethings don’t put saving at the top of their lists, and many are understandable. For starters, according to the National Center for Education Statistics, the average college graduate has $19,000 of debt, not including credit cards. The pay at most entry-level jobs barely covers fixed expenses such as rent, insurance and utilities. And the things we typically save for – retirement, first home – seem light-years away.

But the benefits of saving early and often are undeniably huge. It’s finding the money that poses a problem.

So you have to look harder and perhaps make a cut here or there. Pack your lunch. Take the bus and save on gas. And just like that, you’ve scrounged up an extra few dollars a day, an extra $100 a month. Invest that each month starting when you’re 25, and you’ll have a cool $349,000 in 40 years.

That’s because one of the biggest perks of starting early is that you can actually put less away each month. That $349,000 assumes that you never up your contributions. But as your income climbs, the contributions should too, adding to that pile of cash. Soon enough, you’ll be able to bank on retiring with $1 million in your account.

Sound like something you could get into? Here’s how to get the ball rolling.

Split your focus. Debt can be a heavy weight on your shoulders, and it usually makes sense – financially and emotionally – to eliminate it as fast as possible. But student loans are relatively cheap debt, meaning you can stretch them out over time and pay them off slowly. Do that, and you’ll have money left over to start an emergency savings account.

That doesn’t mean you should stash emergency cash in a jar or under your mattress. Your best bet is to put it into an online savings account, which tends to yield more interest than what’s offered by your local bank. Check out to find some of the best deals out there.

Just try it. Many companies have switched to a system of automatic enrollment when it comes to their 401(k) programs; when you fill out your new-employee paperwork, the default option is to participate. You can still opt out, but why not give it a go for a month or two and see how it suits your budget?

Plus, there’s a good chance your company will match a portion of your contributions. Who doesn’t like free money?

Consider an IRA. If your company doesn’t have a 401(k) program, you can still go it alone – you just won’t get those matching dollars. A Roth IRA is a great option for younger investors. For starters, most probably meet the eligibility requirements when it comes to income (less than $110,000 for singles and less than $160,000 for married people filing a joint tax return). But the Roth is also a bit more lax as far as withdrawals.

“You can take out up to $10,000 to buy your first house, and you can use the money for education costs. You don’t have that kind of flexibility with the traditional IRA,” explains Mark Bruno, author of “Save Now or Die Trying.”

Once you’ve opened your Roth IRA, put it on autopilot so a certain amount is transferred from your checking account each month.

Make it easy on yourself. You don’t have to know the ins and outs of the market to be a good investor. For the most part, it’s best to be hands-off. Bruno suggests something called life-cycle retirement funds, which take most of the work off your hands.

“They are basically one-stop-shopping funds because they’ve got exposure to stocks and bonds,” he says. At the start, the emphasis will be on stocks, because they’re risky, and you have more time to make up for any losses. As you creep toward retirement age, they’ll rebalance to focus on bonds and play it safe. All you have to do is pick the fund with the date closest to the year you plan to retire.