As someone who is in their 20s, I know how hard it can be to start saving for retirement in your 20s. Between paying medical bills, groceries and rent in New York City, my budget usually involves making trade-offs, whether it means opting to travel to a cheaper grocery store or not going out for dinner or drinks with friends.

Of course, I’m not alone in feeling this way. The Deloitte Global 2022 Gen Z & Millennial Survey looked at more than 23,000 millennials and Gen Zers internationally and found that nearly half of them were living paycheck to paycheck; cost of living was also rated as one of their top concerns.

Between high inflation rates — 8.5% in July! — student loan debt and the rising cost of rent and medical expenses, it’s no surprise younger generations are feeling like they’re falling behind previous generations when it comes to saving up for retirement.

There’s data to back this up, too. A 2021 study conducted by the Center for Retirement Research at Boston College found that 28- to 38-year-olds had built up less wealth than previous generations had by the same age, largely because of higher student loan debt.

So, what can Gen Zers and millennials do when it feels like the cards are stacked against them? Select spoke with Barbara Ginty, certified financial planner and host of the Future Rich Podcast , about the importance of saving for retirement in your 20s, even when a lot of factors may be out of your control.

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First off, there are generally two ways for you to save money: By cutting back on your expenses or finding a way to earn more money.

Generally, personal finance advice is best suited for those who have some income left over every month after paying for essential expenses such as housing, transportation, food and medical bills. If the majority of your income goes toward these categories, it can be difficult to cut back, though that could also mean finding cheaper housing, getting roommates or moving back home for a while. Spending less money could also mean cutting discretionary expenses such as dining out, going to the movies or using multiple streaming or subscription services.

The other option you have is to find a way to bring in more money. You could try getting another job with higher pay, starting a side hustle or asking for a raise at your current job, Ginty explains — with today’s tight labor market , securing a new job with higher pay might not be as hard as it used to be.

As of July 2022, those who have changed jobs increased their wages by 6.7% compared with the 4.9% increase those who stayed in their current roles for the past three months saw, according to the Federal Reserve Bank of Atlanta . Why you should start investing in your 20s

Ginty explains that the primary factor young people have going for them when it comes to saving for retirement is time. When you invest, you’re earning compound interest — or, interest on your interest — so you’ll earn substantially more on your investments over longer periods of time than you would over shorter time frames.

She uses the following example to highlight the advantages of investing early: If you invest $2,000 a year (which is just $166 a month) from age 19 to 27 and don’t save anything again beyond that point, and assume your investments yield an average 10% rate of return over the course of your lifetime, you’ll end up with $1 million by the time you’re 65.This signify the importance of saving for retirement in your 20s .

On the other hand, if you wait until age 27 to start saving $2,000 a year and then save for the next 38 years, you’ll end up with $800,000 by age 65. In other words, you would make $200,000 more by the time you’re 65 if you started investing at age 19 and would have only had to save for eight years total, versus starting at age 27 and saving for 38 years straight.

Millennials and Gen Zers aren’t just disadvantaged when it comes to saving for retirement because of student loan debt and increased cost of living. While previous generations may have received retirement benefits through pensions, beginning in the 1970s , an increasing number of employers started offering 401(k) accounts to their employees instead. As a result, the onus of saving […]

source Here’s why it’s so important to start saving and investing in your 20s

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