I’m very excited to share the following post from Kelly Lannan,  Director, Personal Investing, Fidelity Investments. I’m tentatively dipping my toe into accepting guest posts, and this one is a fabulous one to start with! Michelle

In the past decade since the Great Recession, a lot has changed in my life – learning to live on my own, starting a career, getting engaged – are a few milestones. During these best efforts to be an adult, three financial lessons stand out:

1. It’s never too early to start saving for retirement

2. It’s also never too late to start saving for retirement

3. When you don’t know about something, inaction is typically not the best approach

Flash back to 2007 – the year I graduated college. Like most recent graduates, I left college feeling nostalgic about the last four years of my life, but excited for the future ahead. But unlike other recent graduates prior to my class, I entered the real world at the brink of the financial crisis – joining the workforce during an unsettling time – when many established employees were losing their jobs and the stock market was crashing.

It felt chaotic.

With that abrupt introduction into adulthood, and armed with my liberal arts double major in history and political science, I felt especially unprepared for the real world financial decisions I would soon have to make. So when I started my first job and was fortunate to be offered a 401(k) as part of my benefits package – I didn’t take advantage of it. All I knew was a 401(k) was about retirement – and that was the last thing on my mind as a 22-year old. And the other limited knowledge I had about a 401(k); I associated it with the stock market. Why would I want to put money into something that seemed so scary at the time?

No way.

And no one at my job advised differently. My coworkers mentioned the 401(k) as a good benefit, but didn’t have strong opinions on why I should – or should not – enroll. So, I did what most people do when they don’t have much knowledge on a subject – I took no action. So for four years at that first job, I didn’t invest in my 401(k). But I was young. No big deal, right?
However, that’s not to say I wasn’t being financially responsible.

Like many of my millennial peers, I’m a good saver. From when I was a child, my parents conditioned me to save – put my money away. I saved my money in a conventional bank account, but did not invest it. But I had money set aside in case I needed it. Thinking back, my saving mentality was probably heightened when I saw so many people losing money, including family friends. I think this was a factor in creating a generation of pretty good savers. In fact, nearly 60% of Millennials have an emergency fund to cover unexpected funds, and on average, that amount is $9,100 – more than our older peers (Boomers at $7,100 and Gen X at $8,700) .

Two years later, after getting my MBA, I started a new job at Fidelity Investments, you know, “America’s Retirement Leader” – and suddenly my coworkers had strong opinions about enrolling in a 401(k), and investing in general. Upon joining Fidelity, I quickly learned about the importance of starting early to save for retirement, based on the concept of compounding. The snowball effect of the potential of compounding makes investing, particularly in an account with tax benefits, even more attractive. Compounding is when you earn money not just on the money you contribute, but also on the money you earn. It’s returns on top of returns on top of returns.

According to Fidelity data of retirement savings plans, those who stuck with investing during the crisis have been rewarded in the long-run – seeing approximately 50% more growth in their balances, versus those who fled the market 10 years ago .

When I think about my adult financial life starting during the financial crisis, 10 years later, here are three lessons I learned:

Lesson 1: It’s never too early to start saving for retirement

Believe it or not, even kids can start saving for retirement – with a Roth IRA for kids/minors –though they will need an adult to serve as a custodian. It may seem crazy for a child to start saving for retirement, but the point is – compound interest is real! And I don’t know anyone who has thought “I wish I started saving for retirement later.”

Lesson 2: But it’s also never too late to start saving for retirement

While saving early gives compounding more time to work, the flip side is also true: it’s never too late to start. Some people get to a certain age and think saving is hopeless. It’s not true. I started saving for retirement about six years into my career, but it’s better than not starting at all. To try to make-up for lost time, I immediately contributed 17% — which includes my personal contribution and my employer match. It’s so important to contribute enough into your 401(k) to get the company match, otherwise it’s like leaving “free money” on the table. But even starting at age 45 or older is better than nothing.

Lesson 3: When you don’t know about something, inaction is typically not the best approach

When I think back to my first job, instead of relying on my coworkers’ disinterest in my 401(k) – I should have gone to HR, or the 401(k) provider directly with my questions. Or at the very least, I could have done some research online to learn more about investing. Contributing to a 401(k) is not just about buying stocks – more so it’s about thinking about your time frame, risk tolerance and goals and then investing in a way that aligns with those factors. Some people opt to figure it out themselves, but others may want to ask a professional for help – there are options to do both.

Of course, hindsight is always easier. But when I first started working, instead of assuming I knew everything there was to know about a 401(k) because I knew it helped you save for retirement and meant investing in the stock market – I should have done some more homework. But probably similar to a lot of my peers, I made a decision based on my limited knowledge of how a 401(k) works. I didn’t know enough about economic cycles at the time – and didn’t think about investing for the long-term – something I had the luxury of at 22-years old.

Because of my lack of knowledge, I was hesitant to talk about my finances. Not just with financial professionals or my coworkers, but also with my friends and family. I assumed because I wasn’t a money expert, my voice would get lost. But now I realize, so many of us lack confidence when it comes to our money, but that doesn’t mean we should sit silently, without taking action. I didn’t need to be an expert to ask questions, be curious, and find answers.

I think about all the financial lessons I’ve learned in the last 10 years, and those real-world experiences drive me in my current role, which is to educate college-aged students about their finances. My personal experience motivates me to help other young adults feel empowered when making financial decisions. None of us are born knowing how to manage our money, but with some education, commitment – and more sharing of our financial lessons – we can all learn on our individual journeys.

Kelly Lannan, Director, Personal Investing, Fidelity Investments has been at Fidelity for four years. Kelly received a Bachelor of Arts degree in History and Political Science from Union College in Schenectady, NY and her MBA from Babson College. While at Union, she was a division one ice hockey player and team captain for two years. She’s based in Boston and enjoys running and traveling. www.fidelity.com/mymoney

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.

[1] Fidelity Investments, Millennial Money Study, October 2016

[2] Based on two surveys: The PLANSPONSOR magazine 2017 Recordkeeping Survey (© Asset International Inc.), based on defined contribution plan assets administered and number of participants of recordkeepers, as of 12/31/2016; and Cerulli Associates’ The Cerulli Edge®Retirement Edition, Q3 2017, based on an industry survey of firms reporting total IRA assets administered for Q2 2017.

[3] The Fidelity Investments 10 Years Later analysis consists of two components: first, an online survey was conducted among 1,205 adult current investors who were also investing 10 years ago. The survey was fielded August 24-30, 2017 by ORC International, an independent research firm not affiliated with Fidelity Investments. In addition, Fidelity analyzed the behavior of nearly 1.5 million participants in Fidelity workplace retirement plans and more than 5 million clients with Individual Retirement Accounts (IRAs).

* In order for me to support my blogging activities, I may receive monetary compensation or other types of remuneration for my endorsement, recommendation, testimonial and/or link to any products or services from this blog. Please read my disclosure here.*

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I am an obsessive foodie, but not self-righteous with it, love travel, meeting new people, helping you look good, and am freaked out by people who don't enjoying reading...something! Grab a Perrier, read my blog, feel free to drop me a line! Hope to hear from you soon.

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