Seth just graduated from college and has joined the workforce. His uncle tells him that he should open up a retirement savings account and contribute to it each month. Seth feels that because he does not plan to retire for another 40 years, there is no reason to start saving for it now. Explain to Seth why he should consider taking his uncle’s advice. (2 points)
Seth should consider taking his uncle's advice because saving for retirement early allows for the power of compounding to work in his favor. Compounding refers to the ability of investments to generate earnings, and for those earnings to then generate their own earnings over time. By starting to save for retirement early, Seth can take advantage of the compounding effect and potentially grow his savings significantly over the next 40 years. Additionally, starting to save now gives Seth the benefit of time, which allows him to take on more risk and potentially earn higher returns with his investments. Saving for retirement early also provides Seth with financial security and peace of mind in the future, as he would have a solid financial plan in place when he eventually decides to retire.
