Kids, we know how interest works, right? A while back I made a post about how credit card interest can screw you, but we know how interest can be good for you too, right?
I suspect we don't know about this because on one of the posts I made about it someone said something about how it is evil that money can make money, but you know that's not just for the ultrawealthy, right? That is legitimately something that you can and should take advantage of in some kind of retirement/savings/investment account.
Let us say that you are twenty years old, have no money to put into a savings account, but have a job that pays you well enough that you've got twenty dollars to spare from each paycheck.
Let us say that you put that into a normal savings account; normal savings accounts have an average interest rate of .56 APY. Let us say you are going to be working until you are sixty, and that you will add forty dollars to that account every month (twenty bucks from each paycheck) for a total of $480 per year.
At the end of 40 years you would have about $21.5k.
That's a pretty good chunk of change! twenty thousand dollars is a lifechanging amount of money. But look at the total interest. In forty years you would have accrued only $2300 in interest.
Now, instead, let us imagine that you are a member of a credit union that offers you a free, high-yield savings account with a decent APY. Everything else being the same, but putting that money in an account with a 4% return does this:
Your total contributions that you put in stay the same, but the amount of money you have at the end of forty years more than doubles.
Let's say you have a thousand dollars to put in the account at the beginning and run it again.
Low interest account: you add $1000 at the start and have an extra $1200 at the end.
High interest account: you add $1000 at the start and have an extra $4000 at the end.
There are many, many very stable opportunities for savings that will grow your money. Fifty thousand dollars isn't a retirement plan, but it's a hell of a lot better than what you would have if you just stuck cash in a savings account or if you didn't save any money at all.
I know how hard it can be to save. I know it feels impossible to put money aside, but even if you start with no money and can tuck away five dollars a week you can get a LOT out of that five dollars a week.
This certainly isn't "you can't buy a house because you get coffee at the cafe," but it something that can HELP.
Now, let's suppose you're not twenty. Let's suppose you're in my boat, and you're (almost) forty and you're going to be saving for twenty years. You still don't have a lot of cash, but you know it has less time to grow interest, so you double your contribution and you put in forty dollars for each paycheck for a total of $960 a year.
That is extremely very much not the same thing as putting in forty bucks a month for twenty years. Instead of your interest being nearly one and a half times the amount of your contributions, it is around half.
If you are a young person (honestly even if you are not a young person) and it is in any way possible for you to start putting money into any kind of an investment account, you should do so as soon as humanly possible. The earlier you do it, the more interest you will have and the more money you will end up with when you are nearing retirement age.
This is how individual retirement plans work. This is what a 401K does, but sometimes it does that with matching contributions from your employer (so your employer matches whatever you put into the account up to a certain percentage of your pay). 401K accounts also often have higher APYs than high yield savings accounts, though they have more limitations on how and when the money can be pulled out.
If you are broke as fuck and never learned anything about investing or interest from your family because your family was broke as fuck too, now is the time to learn. r/PersonalFinance is a reasonable resource (and if you ever happen to have a windfall that's the first place I would point you for figuring out how to make the most of it) for learning about this stuff.
Thinking about money sucks! Being afraid you'll never be able to retire sucks! Having to figure out how to save sucks! But there are tools out there that even very fucking broke people can use to make that suck less.
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