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"Youth is wasted on the young."

That parental refrain rings true in the world of personal finance as in so many areas of life. People in their 20s and early 30s, especially those without much money, think they can't afford to plan for their financial future, so they don't.

The fact is, young people these days can't afford not to. With the future of Social Security uncertain, financial advisers emphasize that it's more important than ever for young adults to begin socking away money.

Sound depressing? Don't despair. If you're young, you've got a powerful asset in your corner. It's called time.

The first place to start is with a savings plan. Think of it not as a luxury but as a fundamental part of your budget, and plan for it just the way you plan for spending on food or entertainment. Your savings plan doesn't have to be grand -- 10 percent of your income is a worthy goal, but 5 percent is better than none, said Tom Porter, executive vice president at Seafirst Bank and author of "The Seafirst Guide to your Personal Financial Solutions."

Make sure you have these bases covered:

Wipe out debts you can control, such as credit-card debt.

Make sure you have adequate health and car insurance.

Create a safety net of anywhere from two to six months' living expenses and keep it in a money-market fund, where you'll get a better interest rate than if you kept your money in a standard savings account.

Finally, make a list of your financial goals. Its scope will help you decide how you want to invest later.

One of the first places time comes in handy is in beginning to save for retirement.

"One of the most important things that a person can do is start saving in a company-sponsored retirement plan," said Beth Kobliner, author of "Get a Financial Life."

"Retirement accounts allow you to make the most of the fact that you have a lot of time," Ms. Kobliner said.

Retirement savings plans, also known as 401(k)s, 403(b)s or IRAs (individual retirement accounts), let you defer paying taxes on the money you put into them and the interest that accrues until you withdraw it decades from now. Over such a long period, that could add up to thousands of extra dollars.

To wring the most benefit from this strategy, it's crucial to start contributing to a retirement plan as soon as possible, said David Williams, a financial adviser and president of Northwestern Trust, a local private trust company.

Consider this, Williams said: If you are a 25-year-old who puts $100 a month -- about $3 a day -- into a retirement account that pays 10 percent interest, by the time you are 65, your account will have ballooned to $632,000. That's not counting the effects of inflation, of course, but the amount will still be substantial. If you wait until you're 35 to start doing this, your account will be worth only about $226,000 at retirement. If you wait until you're 45, those $100 contributions would amount to just $76,000.

An increasing number of companies match retirement contributions. At the minimum, Ms. Kobliner advised, put in as much as your company will match every month.

Your employer can tell you whether or not your company has a retirement plan and if you are eligible. As for IRAs, they can be set up through banks, brokerages and mutual-fund companies, which Ms. Kobliner recommended. If you're self-employed, Simplified Employee Pension and Keogh plans also are available.

Once you've enrolled in a retirement savings plan, you can put time to work for you by investing in mutual funds, funds that allow you to buy shares in a variety of companies along with thousands of other investors.

The reason to take this step when you're young is simple: From 1926 to 1994, the average return on large-company stocks has been just over 10 percent, compared with about 5.4 percent for long-term corporate bonds and just 3.7 percent for U.S. Treasury bills, according to Ibbotson Associates, a consulting, software and data-products company in Chicago. Compare that with a savings account that bears an interest rate that hardly keeps pace with inflation.

Ms. Kobliner recommends starting with a stock-index fund. An index fund, like one tied to the Standard & Poor's 500 index, is a fund with investments in companies of all sizes. Its performance usually mimics the course of the overall stock market.

A challenge for the cash-strapped young investor is finding a no-load mutual fund (meaning no upfront fee) with a low minimum requirement, because some funds require as much as a $5,000 investment.

T. Rowe Price has an S&P 500 index fund that requires only a $50 investment as long as you contribute at least $50 a month in an automatic deposit program. Charles Schwab & Co. has some no-load, stock-index funds with minimum requirements as low as $1,000.

How should you pick a fund? Porter suggests reading magazines such as Forbes, Money and Consumer Reports, which regularly rate mutual-fund companies. Also, get a company's prospectus and annual report, which explains what funds the company offers and the costs for each.

Of course, there are risks in taking your money out of a bank account and placing it in an investment such as a stock or bond fund. For one, your money isn't readily accessible. Nor is it insured.

Even so, financial advisers agree that the rewards of most investing far outweigh the risks over the long term. By placing your money in a variety of funds and accounts, a strategy called diversification, you can lower your risk of losing money and improve your profit potential, Porter said.

How should a young investor approach risk? A lot depends on age. If you're in your 20s or 30s, you usually can afford to be less conservative because you won't need the money immediately and you have decades to recoup losses. Once again, time is on your side.

How you split up your money depends on your goals and your comfort with certain levels of risk, but a rough rule of thumb used by financial advisers is to subtract your age from 100. The difference is the percentage of your money that should be in what Porter calls "growth-oriented investments" such as stocks. The remainder should be in "income-oriented investments" such as savings accounts, government bonds, certificates of deposit and money market funds.

Williams recommends that young investors' portfolios include an aggressive stock fund. Two examples are Seattle's Rainier Small/Mid Cap Equity Portfolio and the Kaufmann Fund, which focus on smaller, high-growth companies. Williams also recommends buying shares of a fund that invests in foreign stocks. These carry more risk than a standard index fund but have potential for bigger returns.

Ms. Kobliner, on the other hand, recommends that young adults start out by doing most of their stock investing within their 401(k) or similar retirement plan.

In a retirement plan, "you may want to be a little bit riskier because that's not money you're going to need for 20, 30, maybe 40 years," she said.

Another option is a bond fund. Bond funds work basically like stock funds, but they have a smaller return and less risk. Ms. Kobliner suggests a simple and pretty safe starting point: Find a fund that invests in intermediate-term bonds issued by companies that have high bond ratings.

Regardless of your tack, keep exploring ways to get your money out of your savings account and working for you. You've got a long way to go, but a long time to get there.

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