Remember: your most limited resource is time. There’s really only one thing young people need know about money: Save for retirement, starting now.
Yes, at some point you’ll want to pay off your debt, have an emergency fund and buy a home. Right now, though, you’re burning through your most limited resource, which is time. You can’t get make more of it, you can’t get it back when it’s gone, and you have a limited window to harness its power.
One way to illustrate this is with the story of Aadik, Fisayo and Amrita:
These examples assume 7% annual returns, but the result is the same regardless of the return and contribution assumptions. The earlier you put your money to work for you, the more time you have to benefit from the magic of compounded returns. Your returns earn their own returns, which earn still more returns, in a virtuous cycle that accelerates the more time the money has to grow.
The longer you wait, the worse it getsAnother way to illustrate the same point is to take away the tailwind that an early start gives.