Do Young People Really Need to Save Money?
It's easy to put off saving when you're young. It might seem like you have all the time in the world to plan for retirement or save up for your child's college fund. And if you're just starting out in your career, your income might be mostly dedicated to essential expenses. In these instances, saving might be the last thing on your mind.
The truth is that good financial habits can carry you far in life. The sooner you start saving your money, the bigger your savings can grow over time. Here are a few reasons why you should begin a savings and budgeting plan as early as possible.
Why Getting Started Early Is So Important
Some people believe they can put off saving in their younger years, especially if they don't have a family yet. However, waiting too long to begin saving is much worse in the long run, as it limits how much money you can save over the course of your life. That's why young people in their early to mid-20s are encouraged to begin saving as soon as they secure gainful employment. Additionally, saving before you start a family means that you'll be able to put more money aside.
Saving early can also help you develop better financial habits. Instead of spending money frivolously on purchases you don't actually need, you can put money into your savings account to be used at a later date. This money can help you buy a home, purchase a vehicle, or even plan for retirement when the time is right. It's much easier to maintain a good perspective on your finances when getting started early, as opposed to waiting until you have massive amounts of debt to deal with.
What Can Happen If You Don't Save
Savings constitute a safety net for unexpected occurrences in life. For example, car trouble can happen when you least expect it, whether you experience a breakdown or are in a car accident. Savings ensure you can cover repairs or pay the necessary deductible before your insurer releases funds. Without savings, you may be unable to fix your vehicle in a timely manner.
A lack of savings also makes it more challenging to meet your financial goals. If you plan on buying a home in the near future, a large down payment can reduce interest payments and make your mortgage a lot easier to deal with. On the other hand, a small down payment means higher interest and a longer loan term, which is more challenging for a person to pay back.
Tips for Saving Money While You're Young
Developing a solid budget for your day-to-day life is the first step to building up your savings. While your budgeting needs may vary, many young people experience success with the 50/30/20 budget. In this case, 50% of your income should be put toward necessities, such as rent, mortgage, and bills. The next 30% can be focused on things you want, but don't necessarily need. The final 20% should be devoted to savings, as well as paying down debt.
In addition to developing a budget, there are other great savings tips you can utilize:
- Make more meals at home to avoid dining out or ordering food
- Wait 30 days before making purchases to ensure you really need the item
- Use public transportation to keep gas costs manageable
- Review subscriptions regularly and cancel any that you aren't using
- Look for discounts or special deals when making major and minor purchases
- Track spending to look for excesses or problematic patterns
No matter your age, income, or family situation, saving is crucial to reaching your financial goals. Robust savings can also help you avoid credit cards and loans, since you'll always have money available for unexpected expenses.