In this edition of Free Money Fridays we dive into 401(k) employer matching. When I started my current job, our CEO had a meeting with all the new hires for that quarter. When he started speaking about all the employee benefits, he brought up their 401(k) match. He then asked, by show of hands, who elected to use the program. My hand shot up and as I looked around, I realized I was the only one with my hand up. Out of around ten people, only one person had their hand up, me! I wanted to scream at these individuals and say “You’re giving away free money!!!” Thankfully, I didn’t because I may have been fired. 

If your employer has a 401(k) match program and you’re not using it, you’re throwing away free money. If they provide a 100% match of the first three percent of your salary, you just got a 3% raise! For free!! If your employer provides a 50% match of the first five percent of your salary, you just got a 2.5% raise! And yet, there are still people who do not take advantage of this employee benefit. 

Also, this goes beyond getting free money. This is about saving for your retirement and future. That money you contribute as well as the money your employer matches will sit in an account and grow through compound interest. I’ve already noted this in a previous post that Warren Buffet states one of the greatest gifts in life is compound interest. Each dollar that you put into your 401(k), and each dollar your employer matches is going to grow through compound interest. If your 401(k) account grows at 6% a year, it will double every 12 years (this is called the rule of 72). So think about this, the dollar you put in today along with the extra dollar your employer matches, will be worth $8 in 24 years. That’s some serious appreciation. 

If you’re not taking advantage of your employer’s 401(k) match do it today. If you don’t think you can afford it, wait until that raise or cost of living adjustment and do it then, because it will be like you never got the raise, but you’re making more money. Don’t be the employee with your hand down. Be the employee who retires early because they took advantage of Free Money!