As many students across the country approach graduation and start their careers, we wanted share a few tips for young professionals looking to save and invest for retirement. The earlier you start the better!
Here’s the Guide on how to get started:


Make saving a requirement, not what is done with leftover cash. Route the savings automatically into a bank account so you aren’t tempted to touch them. That means before committing to an apartment or a car payment, calculate first whether you can afford what you are eyeing and still save a specific portion of savings from your salary.

Use the 50-30-20 budget so you don’t overspend based on your income: 50% of pay after taxes would be reserved for necessities—rent, car payments and insurance, student loan payments, phone, food and so on; 30% could go for entertainment, and the remaining 20% is to be saved.

Saving for Emergencies

it’s crucial to prepare by paying off credit cards entirely every month and having an emergency fund to cover basic expenses like food, housing, health related expenses, phone and car payments, in case a person loses a job.  Three to six months are the target.

Saving for Retirement

Saving for retirement should begin with a first job, particularly with a workplace pension given they legally obliged to offer free money to employees who save into their pension.

As a rule of thumb, if a person saves 10% of every paycheck starting with their first job, and continues the discipline until the current full retirement age (65) they should have what they need to pay for retirement even if they live into their 90s.

Where to Save and Invest

Although safe money choices are paying almost no interest now, money for short-term needs should go into money-market funds or high-yield savings accounts.

Retirement money, however, doesn’t have to be protected the way short-term cash must be. In fact, being overly conservative with retirement investments can be dangerous because the savings won’t adequately grow.

Historically, the stock market—measured by the S&P 500—has gained about 10% a year on average.  But there can be years like 2008, when the stock market loses 37%, or years like 2019, when it gained 31.5%.

Stick most of your pension pot in a diverse mix of stocks through a fund like a total stock market index fund, add to it with your monthly pay, and don’t touch even if a market downturn occurs.  Although bear markets and losses will happen, historically the good years have far exceeded the bad.

Source: Barron’s: A Young Worker’s Guide to Saving for Emergencies and Investing for Retirement

Capital at risk.