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When you're young and just starting out, it seems that all you have are bills, bills and more bills. Planning? Just keeping up with the bills is planning enough for most young people. Retirement is so far away, it seems more like a dream than reality. Besides, when you're young, you never really believe you'll ever get old.

When you're in your twenties, with all that time between then and retirement, even small savings will grow very large over 40 or so years. A twenty year old could turn fifteen bucks a week into half a million dollars by the time they reach retirement age. It's easy to set up an IRA. You can do it with as little as $50 down and $50 a month coming out of your bank account automatically each month. Set it and forget it.

An emergency fund? Who has enough extra cash to save for emergencies? Yeah, it would be great to have a couple of thousand stashed away for an emergency, but if something goes wrong there's always the credit cards.

Yes, the credit cards. With credit card interest rates averaging more than 14 percent, relying on credit cards to bail you out of emergencies can put you into a debt hole that can take years to climb out of. It's much better to keep your credit card spending under control and pay them off every month, or at least pay more than the minimum. It's always easier to stay out of financial hot water than it is to get out of debt. Besides, it's not that difficult to set up an emergency fund.

Why not open a money market account? You can do that online. Set up a savings account with no minimum deposit, link it to your bank account and have $25 deposited automatically from every paycheck. If you get paid every two weeks, you'd have $650 saved in a year. You won't even miss the money after the first two paychecks. And if you get paid every two weeks, put some of extra you get on those three payday months into your account. You'll have over a thousand in your account in no time.

How about insurance? Won't my employee benefits take care of that? Probably, especially when you're in your twenties. You're healthy and you have group health insurance. But do you have enough life insurance? Most employers only give you the minimum. What if something happens to you or you can't work? When you're young and just starting out, you need to think about how your family would manage financially without your income.

Financial planning in your twenties is important. You don't need to save a lot to gain a lot because you have time on your side, but take care with debt. The magic of compound interest gets ugly when it's working in reverse. Letting your credit card spending get out of hand can kill you financially. A little planning now can bring a brighter future for you and your family. You might be surprised at how bright.

Learn more about this author, John McDevitt.
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