When you’re young and fresh out of college, presumably, you’re earning the bottom of what your career can potentially yield after 20 more years in the business, but that doesn’t mean you should bank on making more money in the future as your savings plan.
Let’s put it this way. If you’re young, and making $30,000 a year, you should assume that you will make $30,000 for the rest of your life (even if it isn’t true).
Because you don’t know what will happen.
You could make $30,000 now and $300,000 next year, but you may end up only making $30,000 forever. It’s an awful possibility, but it’s true.
People who think “Why do I need to save for retirement or emergencies now? I have 20 years to make more money, and I’ll save a whole bunch, then. I don’t even have extra money to save now anyway. My budget is too tight“, are just kidding themselves.
If you don’t save anything now, but you end up being way behind your expectations of salary, it’s just a recipe for financial disaster.
When you save money as early and as young as possible (even if it’s very tight in your budget to put aside even $25/month), you’re building an insulation against what I’ve described above.
What if you end up at the age of 65 realizing too late that if you had started saving $25/month 45 years ago, at 5% interest, you’d have had $51,893.41 at the end of it? All depends on your savings rate I guess (some examples here)
It still may not be enough to live on, but $51,893.41 is better than $0. Or being in debt in your golden years.