A retirement account is a special type of savings account with a single, long-term goal: to hold money for you to live on after you stop working. Unlike a regular savings account, these accounts come with a major perk from the government to encourage you to save for the future: tax benefits.

While there are many types of retirement accounts, most people start with one of two: the 401(k) or the IRA. They share the same goal but you access them in different ways.

A 401(k) is tied to your job. Your employer sets it up, and you contribute directly from your paycheck. The best part is that many employers offer a "match." This means if you contribute a certain amount of your salary, they'll add their own money to your account on top of it. It's essentially free money.

An IRA is an account you open on your own, not through an employer. It's a great option if your company doesn't offer a 401(k), or if you're self-employed. You can also have an IRA in addition to a 401(k).

The single most important factor in saving for retirement isn't how much you earn, but how much time your money has to grow. This is because of something called compound growth. It’s the process of earning returns on your original savings and on the returns you've already accumulated. Your money starts making money.

Let's look at two friends, both saving $200 a month. Maria starts at age 25, while Sam waits until he's 35. We'll assume their money grows at the same rate (7% per year).

By starting just ten years earlier, Maria ends up with nearly double the amount Sam has, even though she only contributed $24,000 more of her own money over that first decade. That's the magic of compounding.

Let's check what you've learned.

Getting started with a 401(k) or an IRA in your 20s is one of the most powerful financial moves you can make.