I know a hard working lady in her early-40s who was still in high school when she read in a magazine about retirement accounts and how they work. The thought of putting away a small percentage of income every week or every month and then watching it grow and compound in value over time – automatically and without any extra effort or work involved – fascinated the teenager. She thought it was the best idea she had ever heard. The concept of making money work for you rather than just working hard for money was brilliant, she decided – and she wanted to put the idea into practice without delay.Most of her teenage friends preferred to spend money and not worry about saving it for anything, especially a far-off retirement plan. A trip to the mall was their idea of an intelligent way to manage money because, after all, they were young and had plenty of time to worry about budgeting and saving when they got older and had more grown-up responsibilities.
Her parents advised the adolescent to build up her credit rating if she wanted to prepare for the future. “Instead of setting up a retirement saving account you should get your own credit card.” They helped set her up with her own plastic and soon she was racking up unnecessary debt by buying magazines, shoes, and pizza.Looking back she is amazed at how bad that advice turned out to be. “I could be retired by now if I had started saving 30 years ago,” she says. “But instead I just got caught up on the treadmill of being a typical consumer and considering credit card debt as a fact of adult life.”