Saving is an important part of financial independence, but conventional saving advice may be unsuitable for young people. Before the critics pounce on the notion that the young shouldn’t necessarily focus on building savings, bear with me: as a middle-aged financial planner, I have a solid rationale, and plenty of experiential evidence, to back it up.
Common financial planning and economic theory assume that income and expenses rise in a straight line. In practice, incomes may rise more exponentially for a young person, or sometimes in large steps upward due to promotions or job changes throughout a worker’s career.
tap here to see other videos from our team.
Income tends to peak between age 45 and 54 according to Statistics Canada, while a 2018 PayScale survey of 1 million Americans found earnings topped out at age 55. Over a lifetime, an average person’s income looks like an upside-down U shape, rising to a peak mid- to late career before falling afterward and during retirement.