Question of the Week

"Hey Treyton, how soon should I start saving for retirement?"

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The quick answer: As soon as possible

The long answer: While you should start investing and stashing money away for retirement, there are typically a few other areas of personal finance that need addressed first - one of those being an emergency fund. An emergency fund is a savings account where you keep anywhere from 3-12 months of living expenses.

The reason it's important to at least partially save towards an emergency fund before investing is because if you invest all of your savings and an emergency comes up, you would probably have to sell off your investments early or potentially even have to take on debt.

Also, it's important to begin paying down any high-interest debt before investing. High interest is typically considered anything over 8% and the reason you want to pay it down before investing is because that debt may be costing you more than you could earn in the stock market - and most people don't want the weight of debt on their shoulders longer than they have to.

That said, if you have a little debt and you're working towards saving for your emergency fund, it may also make sense to invest simultaneously if you're able to manage your cash flow.

Ultimately, you want to get started as soon as you can because the earlier you invest, the longer you have to let your money grow.

Financial IQ #6 - 6.6.21