A few weeks ago we posted about motivating yourself to save and invest monies. Last week, an article in the Eastern Pennsylvania Business Journal highlighted a new marketing campaign from the Pennsylvania Institute of Certified Public Accountants (PICPA) and the national Ad Council aimed at getting people in their 20s and 30s to save more money and build long-term financial security.
A recent study by Christopher Thornberg and Jon Haveman, economists with Beacon Economics in Los Angeles showed the number of people in the 25-34 age group (that's us) maintaining an interest-bearing account or other saving instrument has declined from 65 percent in 1985 to 55 percent in 2004. In addition, the age group's net worth has fallen from $6,788 in 1985 to $3,746 in 2004 despite higher incomes.
With pensions drying up, and Social Security's future uncertain, people can no longer depend on them to be there when they reach retirement age. The campaign is geared toward young professionals because we have time on our side.
"If you sit down with a financial planner when you're in your 20s and 30s and he said 'If you put away this now it will be worth this when you retire,' you'd say 'Wow! That's a lot.' But if you do it when you're in your 50s and 60s, and they give you the same numbers, it's depressing," says Andy Weidman, PICPA president.
"It's easier to put away $500 when you're in your 20s than it is to put away $5,000 when you're 60. People have to realize that for every 10 years they wait to save, they are reducing their nest egg by half," says Virgil Kahl, CPA.
The campaign's home page features Benjamin Bankes, the Feed the Pig spokespig who provides tips for everyday saving and useful calculators to help set savings goals and pay down debt.
Suze Oreman, financial consultant and author of Young, Fabulous and Broke, a financial book geared toward young professionals suggests the following:
1. Take full advantage of your company's 401(k) plan or 403(b) plan and pay in up to the full matching or partial matching amount.
2. Create an emergency savings account to cover basic cost of living needs in a high-yield savings account like Emigrant Direct where your money will be accessible in case of an emergency.
3. Save further by opening up a Roth IRA.