There are a million clichés advocating getting started as soon as possible, and they exist because it is true; the sooner you start working towards a goal, the better. This is certainly the case when it comes to financial success.

At our practice, we feel so strongly about staring young that we actually offer the first financial plan out of school (or university) free of charge.

Once you first start earning money, if you are able to allocate funds to short, medium and long-term goals, not only are you on your way to achieving those goals, you are also forming good habits that are likely to last a lifetime.

I remember my first full-time job, I was earning $920 a fortnight. It felt like a million dollars! This is the same for most young people when they enter the full-time workforce.  At that point, I had no fixed expenses or financial commitments, therefore I had a very decent disposable income. I wish I had set myself a reasonable allowance for discretionary spending and started putting money towards more substantial goals.  Instead, like most young people at this age, I spent more than I should have on things that add very little value; nights out, fashion and fast food.  Once you start living this lifestyle, it’s hard to change. The wrong habits are formed.

I wish that, at an early age, a portion of my income was directed towards substantial goals: things like overseas holidays, as well as building wealth, perhaps saving for a house.  As time went on, I starting working towards more meaningful spending, but I regret not beginning earlier.

Further to this, the compound interest effect really rewards starting early; the longer money is invested, the greater the return on investment. We encourage our young clients to make contributions to super when they first start working before incurring financial commitments. A common strategy for some parents is for their kids to contribute to super in lieu of “room & board”.  At age 20, $1,000 contributed to super is worth over $20,000 at retirement (based on a 7% return). Contributing $1,000 per year (less than $20 per week) between age 20 and 30, will see an increase in super of about $157,000 at retirement. Commonly, the period between age 20 and age 30 is the time where it is easiest for many to find that extra $20 per week, before mortgages and school fees deplete the bank account.

By contrast, if you contribute that same $1,000 per year from age 30 to 65, you will increase your super balance at retirement by a little under $140,000. Still a significant number, but less than those who start early for a much shorter period of time.

By forming good habits early, it is likely that, not only will you have a more secure financial future, but you’ll probably end up with more meaningful experiences along the way as well.