Money Smarts for College Grads

You’re pondering the start of student loan repayment and beginning a new career. So what do you do? Begin saving for retirement, of course.

Never a Better Time

Granted, your college loans will take a chunk of your beginner’s salary, but there will never be another moment like this in your life where time has such a dramatic impact on your long-term savings. Learn this for yourself by going to the compound interest calculator at www.investor.gov.

Small Turns Big

Try this on the calculator. Start out with a $0 balance and save $100 monthly. That’s only a few lattes or a couple of restaurant meals per month. By finding a few savings, you can juggle both this small monthly retirement contribution and pay your student loans. Back to the calculator, earn a hypothetical 7% interest compounded daily and input 40 years, your time until retirement. After 40 years, your $100 per month — $48,000 in total contributions — will have grown fivefold to $264,690.

Time Matters

If you wait 20 years to begin investing for retirement and double your contributions so that you still put away $48,000 using the same criteria, your money would grow to only $104,731. That’s how much time means when you are saving for long-term goals. Yes, pay your student loans. But putting away even a little toward your retirement — starting now — will matter greatly.