For a millennial, saving can seem like a scary word. We often look at saving as something meant for adults looking to buy a house or save for retirement, simply not applicable to us. However, starting to save in your 20's can have incredibly positive effects on your financial wellbeing as you continue into adulthood. Here are some reasons saving is important and some ways to start saving (even if you think you have no money).
Why should I save?
As a young adult, it can sometimes be scary to think about the far off future. We can often think of all the fun parts, like having a house or a family, but thinking about the hard work we have to put in to get there can be challenging. By saving now, you're helping yourself down the path of reaching all of your life goals, with less stress and panic. Here's some concrete reasons why you should start saving now:
1. It takes time to establish good habits
No one is perfect, and especially not with money. To begin the journey to being financially responsible, you have to start somewhere. By setting good savings habits now, you're ensuring that those good savings habits follow you well into the future, when your paychecks and savings goals are much larger and require more hard work and determination. Give yourself the proper toolset now.
2. Life is unpredictable
A scary reality is that you never know what life will throw at you. It's important to be prepared for all of life's unexpected moments, good and bad. Whether it be an unanticipated expense or an amazing life opportunity, you never know when a bit of a financial cushion might come in handy.
3. Simple math: saving takes time
It's basic logic but the sooner you start saving, the more you can save. Especially if you put your money in savings accounts that offer a variable range of interest rates that help you earn money, it's important to start investing as soon as possible, even if it's only a little, so that money can begin to grow.
I don't think I have enough money to start saving... how can I start?
A healthy savings account can seem out of reach, especially if you're strapped for cash. But as a college student or young adult starting out in the world, even pocket change could make a positive impact towards you financial future. Here's some ways to invest small amount of money to grow them into something bigger.
1. Use the Piggy Bank Method
This method is an easy way to set money aside with ease. Much like you would put your spare change in a piggy bank, think of a savings account as a virtual piggy bank. Set up automatic transfers through your bank's mobile app to set aside $5 each pay-day so you don't even have to think about it. Consider a savings account with withdrawal limits or penalties to dissuade you from taking money out frivolously.
2. Set timed, realistic goals
Saving for something like a new laptop can seem daunting. How are you ever going to save hundreds of dollars living paycheck to paycheck? Breaking down the total cost of a goal into reasonable and measurable increments can help make your goal seem achievable and motivate you to save. First consider how much you need to save. Even if you not saving for something specific, set a numbered goal, like $500. Next set a time limit, like over the next 6 months. Now consider how often you can save realistically. If you receive a paycheck, a good idea is to plan to set money aside on your payday, which is usually biweekly. Doing some simple math, if you wanted to save $250 in 6 months and are going to set aside money twice a month, you would need to save $20 from each paycheck, or $10 a week. This makes the task of saving seem much less daunting.
3. Save where you can (and invest the rest in YOU!)
There's lots of small things you can do to cut back without becoming a hard-core budgeter. Spend one week paying attention to how much you do certain things. Create a note on your phone and jot down how many times you went out to eat, grabbed coffee from Starbucks, or went to a late movie with your friends. Begin to make conscious decisions about where you spend your money. Maybe set a goal to only grab Starbucks once a week and bring coffee from home the other days. Try and bring lunch to work or school a few more days of the week. Next time your friends want to go see a movie, invite them to watch some Netflix at your place. And each time you make a money conscious decision, try and invest the money you would've spent into your savings account.