Key Takeaways

  • The best time to start building financial habits is earlier than most people think — even small amounts saved consistently can create meaningful momentum over time.
  • A first job with a 401(k), 403(b), or employer match is one of the earliest opportunities to begin building long-term financial security.
  • Retirement savings should be treated as hands-off money. Cashing out old retirement accounts can create tax liability, penalties, and lost years of compounding growth.
  • Roth IRAs can be especially valuable for young earners because contributions are made with after-tax dollars while future qualified growth and withdrawals can be tax-free.
  • Parents and grandparents can help young people get started through Roth IRA funding support, 529 college savings plans, and custodial accounts.
  • The main goal is  to start early, stay consistent, and let time work in your favor.

Most people don’t remember the first time they saved money. A summer job, a birthday gift tucked into a bank account, a paycheck where someone advised to put some of it away. It didn’t feel momentous at the time.

But those early forgettable moments turn out to matter more than almost anything that comes later. Not because of the dollar amounts, but because of what they set in motion.

Premier Financial Group has worked with clients at every stage of life, and the pattern we keep coming back to is consistent. The people with the most financial freedom in their 50s and 60s are almost always the ones who started building habits in their teens and 20s. 

Our blog series “Financial Moves to Make at Every Stage of Life” was built around that idea. Each installment focuses on the financial moves that matter most at a specific stage of life. We’re starting at the beginning, which is where the biggest long-term opportunities are.

Why Starting Early Changes Everything

The most important move any young person can make is just to begin. It doesn’t have to be a lot. A teenager with a part-time job can open a savings account and put something away each pay period. A young adult landing their first real job can sign up for their employer’s retirement plan and contribute even a modest percentage of their paycheck. 

The dollar amount doesn’t matter so much at this stage. Even $50 per pay period builds momentum over time, and the compounding effect of consistent contributions to a retirement investment account can become something meaningful. We’ve seen people struggling in their 40s and 50s because they treated early retirement savings as optional.

Your First Job Is Your First Opportunity

When you land your first job with a retirement plan like a 401(k) or 403(b), one of the most important things to find out is whether your employer offers a matching contribution. Many do, and it’s one of the most straightforward financial advantages available.

If your employer matches up to a certain percentage of your contribution and you’re not contributing at least that much, you’re leaving part of your compensation on the table. That match is part of what you earn, it just requires you to take the step of enrolling and contributing to collect it.

If you’re just starting out and your employer offers this benefit, make signing up one of your first priorities. Your future self will be glad you did.

Treat It Like It Doesn’t Exist

Contributing early only pays off if you leave the money alone. And this is where a lot of people undo the good work they’ve started.

One of the most common wealth-eroding actions we’ve observed over the years is cashing out a retirement account when leaving a job. It’s tempting because the balance is sitting there and it seems like a reasonable short-term solution. But it comes at a steep cost:

  • Taxes
  • Early withdrawal penalties
  • Years of compounding growth lost

We’ve seen people in their late 30s essentially starting over because they made that choice multiple times in their 20s. Instead, treat retirement savings like hands-off money. When you change jobs, roll the account over rather than cashing it out. People don’t realize that the growth of $1 in a diversified stock portfolio earning an annual return of 8% can grow to $1,359 in 30 years.  It pays significantly to keep each dollar invested over the long-term.

The Roth IRA Is One of the Best Tools for Young Earners

If you’re in your teens or 20s and earning income, a Roth IRA deserves your attention. The reason it’s so well-suited to younger earners comes down to taxes. Contributions are made with after-tax dollars now, and qualified withdrawals in retirement can be tax-free. When you’re earlier in your career and likely in a lower tax bracket, that trade-off is especially favorable. 

A working teenager with earned income may be eligible to contribute to a Roth IRA, typically through a custodial Roth IRA if they are still a minor. And a note for parents and grandparents: If a young person in your family has earned income, you can gift money specifically to fund their Roth IRA up to their earned income for the year, within the annual contribution limits. It’s one of the most tax-efficient ways to give a financial head start to someone you love.

How Families Can Help

Beyond helping fund a Roth IRA, parents and grandparents can help the next generation build financial systems early.

529 college savings plans can be a helpful place to start. When a child is born, opening a 529 plan and contributing consistently over time may give the account an opportunity to grow before going to college. Like any savings goal, it can help to begin with the amount you hope to have available, then work backward to determine a monthly contribution that fits your budget. Once that number is set, automating contributions can make saving easier and more consistent.

529 plans can also create a meaningful opportunity for the whole family to participate. Relatives who want to give a lasting gift for holidays, birthdays, or other milestones may contribute directly to the account instead. When used for qualified education expenses, 529 plans can offer tax advantages, though rules and benefits vary by state and individual situation.

529 accounts have another special feature. If a child decides later in life that higher education is not part of their plan, the account can be converted to a ROTH IRA for retirement savings instead.

Custodial accounts, including UTMA and UGMA accounts, are another option families may want to understand. UTMA stands for Uniform Transfers to Minors Act, and UGMA stands for Uniform Gifts to Minors Act. Both allow assets to be held for the benefit of a minor and managed by a parent or other custodian until the child reaches the applicable age of majority or termination age, which varies by state and account type.

Unlike 529 plans, custodial accounts are not limited to education expenses. However, assets placed in these accounts are generally considered the child’s property, so families should understand the rules, tax considerations, and potential financial aid impact before contributing. For some families, they can be a useful way to pass along assets while helping the next generation build financial awareness.

The Best Time to Start Is Now

If you’ve read this far and you haven’t started yet, or have started but you haven’t revisited your contributions in a while, consider this your nudge.

Time is one resource in financial planning you can’t earn back. Every year of compounding growth you miss in your 20s is much harder to make up in your 40s. Those who build the habit early, keep it consistent, and leave it alone will have the most options later in life.

You don’t need to have it all figured out; you just need to start somewhere.

At Premier, we have expertise for every stage of life, including when people are just getting established and those who are helping their next generations build their foundation. If you want to talk through what makes sense for your situation, we’re here to help.

Next up in our series is “Midlife Money Moves: What to Focus on in Your 40s, 50s, and Pre-Retirement Years.”