Project your retirement income. One way to motivate yourself to save is to project what even a small amount of savings will grow to by the time you reach retirement. "A better understanding of compounding hopefully will show people the importance of starting early and also the value of contributing anything at any time and allowing it to compound over time," says Robert Clark, an economics professor for the Poole College of Management at North Carolina State University. "People tend not to think that $1,000 a year would grow as much as it could." Other research has found that picturing yourself in old age can also encourage people to save more.
[Read: Retirement Benefit Changes for 2014.]
Don't wait to save. Money you deposit in a retirement account will eventually be worth much more than the amount you contributed if you allow the account to accumulate for decades. "Due to compound growth (i.e., earning interest on your interest), contributions made early in one's career have the potential to generate large returns at retirement," Manchester says. "However, many Americans systematically underestimate compound growth and instead have the tendency to expect contributions to grow at a linear rate instead of exponential." Saving even a small sum for retirement, especially when combined with an employer match, tax break and compound interest, will put you on a path toward a more financially secure future.