MANAGING YOUR MONEY : PREPARE...

Like many Californians, Dennis and Cathy Evangelatos have a lot of financial concerns. They have a child to send through school. They’d like a bigger home. And they want to have enough money to maintain a comfortable lifestyle through retirement.

But the Evangelatos have an ace in the hole: their youth.

The Westwood residents are in their early 30s, and they are already setting aside roughly 20% of their income each month--part for a down payment on a home, part for their son’s education and part for the future. In fact, financial planners say, the Evangelatos family is nearly a picture-perfect model of what people their age should be doing.

According to financial planners, younger wage earners should have a savings and investment plan that will provide them with cash for life’s major expenses, an “adversity plan” that provides income for their loved ones in the event that they die or are disabled, and a tax plan that helps them maintain as much of their income as possible.

Starting a savings plan early--when you are under the age of 40--is particularly beneficial. It allows you to accumulate a relatively large nest egg at a reasonably low cost.

“The earlier you start saving, the better,” said John B. Teah, branch manager of Fidelity Investments in Los Angeles. “When you run the numbers, you can see that the difference between saving for 18 years and saving for 10 is pretty dramatic.”

Still, the Evangelatos are relatively unusual, in part because Dennis is a physician. Although their basic financial concerns mirror those of many of their peers, most Americans between the ages of 25 and 40 have neither the inclination nor the cash to save for events that are decades away, planners say.

“It’s the sequence of life,” sighs Robert M. Coleman, a Pasadena-based certified financial planner. “People in that younger age group don’t have any money to speak of, and what they do have, they want to use to buy a house.”

What should you do when you are young and trying to plan for the future?

Buying a home is a good first priority, financial planners say. It is one of the few remaining tax-advantaged investments, it saves you from making rent payments and it forces you to save because you have no choice but to make mortgage payments, whereas you might skip a month if you were just putting the money in savings.

Interest payments on a home mortgage are also tax-deductible, which helps shelter some of a homeowner’s earnings from taxes.

Those who have children also may want to start saving for college expenses. And the earlier you start, the better.

If you still have cash after making the house payment and contributing to Junior’s college fund, consider putting money in a tax-advantaged retirement account, said Mitchell Kauffman, a certified financial planner with American Financial Planners Group in Pasadena.

Why start saving now, when you could be 30 or 40 years away from retirement? The simple answer is compounded interest.

Consider the fate of two 20-year-olds starting their careers at companies that offer tax-advantaged 401(k) plans. One worker signs up for the plan immediately and contributes $200 a month for seven years--a total of $16,800. This employee makes no more payments, but allows the account to accrue interest for 33 years until retirement.

Another worker waits seven years to enroll in the plan, then contributes $200 a month for the next 33 years--a total of $79,200, or more than four times the investment of the previous worker.

Who has the most money at retirement? The first worker, whose $16,800 investment has grown to $646,950, Kauffman said. The second worker’s account is worth $617,866.

When you start saving this young, you also have far more options, planners say. Money that is not needed immediately can be invested in riskier ventures that promise higher rates of return. If, for example, investors have a decade or more before they expect to withdraw funds, they might put their money in growth stocks. Over long periods of time, such stock investments have earned double-digit rates of return.

TIPS

* Fight the inclination not to save for events that are decades away. This is the time to make compound interest work for you by starting a savings plan now.

* Buying a home is a good first priority. It forces you to save and provides a hefty tax reduction.

* Look into investing in growth stocks. Over long periods of time, such stock investments have earned double-digit rates of return.