I'm still in college but I've already started saving for retirement

I won't graduate from college until May, but I've been saving for retirement since sophomore year. 

My high school and college years have seen the Covid-19 pandemic, a rollercoaster economy, a housing crisis and soaring prices on everything from eggs to car insurance.

It made me realize that, when it comes to my finances, I needed to start thinking beyond the present, because we never know what the future will hold. 

My parents instilled in me the importance of saving at a young age: When I started babysitting as a freshman in high school, they encouraged me to put aside 50% of what I made.

I haven't even started my professional working life — retirement is at least 40 years away — but with the unpredictability of the economy and the precarious future of Social Security, I'm glad I've taken my parents' advice to heart.

There are several reasons why saving for retirement in college (or even earlier) is valuable.

1. It's a great way to establish good financial habits.

Many college students work to pay for tuition and other school costs. Others take jobs so they can pay for Beyoncé tickets or spring break in Miami.

However, it's important to start thinking long-term with your money when you're young and lifelong financial habits are just taking shape.  

That doesn't mean you can't go to that concert or take that trip, but don't view them as the only target. Could you pick up a few more shifts at work or economize at home so you'd have more available for both now and the future?

2. Your investments will grow faster and further 

Some accounts utilize compound interest, which is calculated based on your principal plus your accumulated interest — it essentially pays interest on top of interest.

IRAs, high-yield savings accounts and CDs all utilize compound interest, so the earlier you start investing in them, the more you can earn.

3. With retirement decades away, you can afford riskier investments 

As a teen or young 20-something saving for your golden years, your time horizon is very far off. That gives you the flexibility to take on riskier investments, like allocating a higher percentage of your investments to equities.

You can wait out the ups and downs of the markets a lot more easily than a 50-year-old who needs to be more conservative with their investments. 

4.  Even if you tie your money up in retirement accounts, there are ways to access it

As a young person with unpredictable income, sealing thousands of dollars away for decades can seem terrifying. 

The money isn't inaccessible, though you will be subject to a 10% penalty if you withdraw from a retirement fund before you turn 59 ½.

And there are exceptions to the penalty, including if the money is used to pay for higher education. So, if your scholarship dries up or your parent loses their job, you can take from your IRA to pay for tuition with no penalty.

There are other exceptions, as well, including for medical expenses, first-time homebuyers, insurance premiums, having a child and federally declared disasters.

Most people think of 401(k)s as the primary retirement vehicle, but they're sponsored by your employer. As a full-time college student, a 401(k) isn't an option.

But an IRA is. An IRA, or individual retirement account, is a tax-advantaged retirement account that anyone can open on their own. While they have a $7,000 cap, there's no minimum deposit. That's useful in your college years when your income can be unpredictable.

If you're still a minor, your parent or guardian can open an IRA for you as a custodial account.

While the IRA is in your name and opened with your Social Security number, they would technically control the assets until you're the age of majority. That's 18 in most states but can be 19 or even 21.

I'm from Connecticut, where the age of majority is 18, and I opened a Roth IRA when I was 20.

I chose a Roth account over a traditional IRA because the funds are taxed now, not when you make withdrawals. Since my goal is to use this money in retirement, when I'll (hopefully) be in a higher tax bracket, it was the obvious choice.

Everyone's circumstances are different, so it's less about a dollar amount than a percentage of the money you're bringing in, whether that's $25 a month or $500.

Just make sure you're comfortable not seeing that money again until you are 59 ½. 

If you invest $100 in a Roth IRA with 10% interest when you are 20 and continue to invest $50 a month at the same rate until you're 65, you'll have close to $438,000 by the time you are ready to retire. 

If you wait just five years and start investing at 25, though, the same amount will net you a little over $270,000.

That's a difference of $168,000 for beginning just five years earlier.

Roth IRA deposits need to be allocated to specific stocks, bonds, mutual funds, ETFs or other assets. While you can do it yourself, I'm still not confident in my investing skills yet, so I chose an account that allowed me to be more hands-off.

A Wealthfront IRA is a great option for hands-off investing through automated index investing.

For a more hands-on approach, Fidelity Investments allows you to choose whether to have Fidelity pick and manage your investments or do it yourself. It's also among the firms that offer custodial IRAs for minors.

The Ally Invest Roth IRA is another great option for beginners who are looking to be more hands-on with their accounts. Ally Invest has a self-directed trading option along with a wealth of education material on investing.

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