Rich in retirement: So 20-year-olds have to put on it

The pay -as -you -go pension is a generation contract that worked well for a long time. The principle is simple: young people work out older retirees by depositing contributions to the pension fund. During the introduction at the end of the 1950s, this went quite well, at that time there were six workers on a pensioner. However, demographic change has changed the starting point a lot: In the meantime, only two workers are coming to a pensioner. This development also depicts the pension level, which reflects the ratio of standard pension to the average income. In the 1970s, the pension level before taxes was still around 60 percent. Since then it has decreased continuously – to around 48 percent.

The pension system is faltering and concern is growing from a system collapse, especially among young people. In the age range of 18 to 39 years, every second assumes that his generation will not receive any legal pension. This is shown by an INSA survey on behalf of the fund provider Fidelity International.

At the same time, fear of poverty in old age grows: two thirds of young people between the ages of 18 and 32 fear that they do not have enough money in old age. This was the result of a study by the opinion research institute GfK on behalf of the insurer Generali. Privately providing provision is very important these days to prepare for age. The following tips are particularly useful for young people who are now at the beginning or in the mid -20s:

The compound interest effect is an important tool to build up assets. Anyone who generates interest on an investment over time and invests it directly again can generate interest with the interest. The earlier you start saving, the stronger this effect comes into play. So small amounts can develop into considerable sums over time.

An example: 20-year-old Kim decides to invest 1500 euros annually in an index fund. The fund offers an average annual return of six percent per year. Kim wants to invest in the fund until she is 65 years old – for 45 years. Due to the compound interest, it reaches a final capital of around 320,000 euros.

Before you invest all your money in long -term systems, it is worth investing an emergency reserve. This should cover the ongoing expenses of about six months and be available at short notice. As a result, you are secured with unforeseen financial difficulties and do not have to fall back on the long -term reserves. It is best to put on a call money account and put the money on it.

The stock market promises the best returns in the long term. Broad and cost -effective stock market -traded index fund (ETF) are suitable. In any case, it is important to find out well about the various investment options in advance and possibly consult a financial advisor.

It is advisable to set up a monthly savings plan. In this way, money is automatically made from the checking account to the custody account. If you automate your savings processes, you regularly pay a specified amount directly into an investment fund. With every salary increase or in the event of a financial gain, you should rethink this sum and, if necessary, increase. Even a small increase in contributions can make a big difference in the long term.

Logically, debts in asset structure are a hindrance at a young age. High interest rates for loans or credit card debts can significantly reduce the assets. Existing debts should therefore be paid out as soon as possible and avoid new debts – especially if they are highly interest.

In order not to slide into the minus, it helps to look regularly where the money is going. Are there perhaps subscriptions that you don’t use at all? Or insurance that are now superfluous? A rule of thumb is: You should save and invest a higher amount than you spend.

At the age of 20, it is not absolutely necessary to put as much money as possible on the side. At this age you can even achieve alternative ways that do not have to do directly with capital investments. For example, education must be seen as an investment. Anyone who trains and acquires new skills can improve their income opportunities in the long term.

It is important to deal with your own financial goals as early as possible. It helps to formulate clear, accessible guidelines for the future and to consider when and with which standard of living you want to retire. Over time, it can happen that these goals change. It is therefore worth checking the finances regularly and adapting the savings and investment strategies. So you make sure that you are on the right track to be financially satisfied in old age.