{"id":6000,"date":"2015-06-24T20:23:30","date_gmt":"2015-06-25T00:23:30","guid":{"rendered":"https:\/\/aspire-canada.com\/?p=6000"},"modified":"2017-02-19T11:42:23","modified_gmt":"2017-02-19T16:42:23","slug":"20-things-you-should-know-about-saving-money-in-your-20s","status":"publish","type":"post","link":"https:\/\/aspire-canada.com\/?p=6000","title":{"rendered":"20 Things You Should Know About Saving Money in Your 20s"},"content":{"rendered":"

20 Things You Should Know About Saving Money in Your 20s<\/h2>\n
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Being a millennial is no cakewalk. The money struggles today\u2019s 20-somethings face are bigger and scarier than those of past generations: crippling student debt, an overly competitive job market and an economy still recovering from a recession.<\/p>\n

On the other hand, these tough fiscal and economic circumstances have taught Generation Y valuable money lessons the hard way, giving millennials a greater inclination to save and a more frugal approach to money management.<\/p>\n

This focus on savings can be a huge leg up for millennials. A well-padded savings account will enable you to achieve your most important goals and dreams, and keep you free of financial nightmares like debt, bankruptcy, back taxes and bad credit\u00a0\u2014 if you do it right.<\/p>\n

Here are 20 things you should know about saving money in your 20s to help you establish a strong foundation for financial success now and decades to follow.<\/p>\n

20 Things Every Millennial Needs to Know About Saving Money<\/h2>\n

1. Saving money is a habit you have to practice<\/h3>\n

Even if you start with saving just $1 more a week, it\u2019s important to establish a savings habit while you\u2019re young. Start saving small, painless amounts and watch your savings account balance grow. You\u2019ll be building your discipline to save money \u2014 and it\u2019ll motivate you to find more money to sock away.<\/p>\n

Heard the financial advice \u201cpay yourself first\u201d? Well that means putting a bit of each paycheck into your savings account before bills and expenses even get close to your money. Save as little or as much as you can \u2014 as long as you are saving.<\/p>\n

2. You have to live below your means to save money<\/h3>\n

Simply put, make sure you have more money coming in than going out. Overspending is the biggest financial problem<\/a> for many, which can be addressed by creating a budget, living a lifestyle that\u2019s realistic for your income and working toward healthy spending habits. For others, low income might be the problem; if you\u2019re in this boat, get proactive and look for professional opportunities, like promotions, networking, vocational training or more education.<\/p>\n

3. Saving money is key to having the life you want<\/h3>\n

You probably have many plans, dreams and goals for your life, from traveling to earning a degree, buying a home or getting married. Whatever you envision for your life, more often than not you\u2019ll need money to make it happen. But money to cover those expenses doesn\u2019t just materialize \u2014 you have to save it up. Turn your dreams into realistic and concrete goals to start working toward your ideal life.<\/p>\n

4. An emergency fund is a must<\/h3>\n

Saving an emergency fund will protect you and help you keep your finances on track. Even when life hits you with unexpected or big expenses, you\u2019ll have the emergency fund to act as a buffer for unexpected expenses \u2014 instead of having to use money saved for other goals, or worse, go into debt.<\/p>\n

5. Start with an emergency fund of at least $1,000<\/h3>\n

But how much should you save for an emergency fund? Personal finance expert Dave Ramsey advises start out with a $1,000 emergency fund, while other personal finance experts suggest saving a month\u2019s worth of expenses. Once you have that baseline started, work your way up to having three to six months\u2019 worth of expenses saved to cover bigger financial troubles, like unemployment or emergency medical bills.<\/p>\n

6. Successful savers set short- and long-term savings goals<\/h3>\n

Those who have the savings habit down know how to set goals and follow them. They set goals, like paying for a trip or buying a home five years from now, and break those into smaller steps. Savers know how much they have to save each month to achieve long- and short-term savings goals, from this year all the way to retirement, and they use those goals as motivation to stay on track and avoid unnecessary expenses.<\/p>\n

7. They also have a system to track and manage funds for different goals<\/h3>\n

Setting a savings goal is an exercise in futility if you don\u2019t figure out a system for saving money that works for you. Stay organized, be able to quickly and easily track your progress, and make adjustments as needed. Some people track savings for different goals using a spreadsheet, while others might actually create different savings accounts or sub-savings accounts to easily keep track of funds slated for different purposes.<\/p>\n

8. Shoot to save 10 percent of your income.<\/h3>\n

While personal experts will have varying opinions on the appropriate amount to save, the advice to save 10 percent of income is a good starting point. Other guidelines suggest saving as much as 20 percent of your income, like the 50-30-20 rule\u00a0that says 50 percent of income should cover needs (like rent, groceries and transportation), 30 percent should cover wants (dining out, vacations or donations), and 20 percent should go to savings or debts. Ultimately, what you can or should save will be decided by your income, expenses, debts, goals and overall financial situation.<\/p>\n

9. Savings have to be balanced with other financial goals.<\/h3>\n

While saving money will always be an important part of your financial health, it\u2019s not the answer to every money question. At times, your financial situation might call for you to put more of your funds toward other goals, like paying down debt, covering education or medical costs, investing or even covering day-to-day expenses when money gets tight. Once you have an emergency fund saved up, funds might be better allocated to other goals.<\/p>\n

10. Start saving for retirement now.<\/h3>\n

Start saving for retirement now and you\u2019ll have to put away less every month. Money you save in your 20s will be worth more in retirement than money you\u2019ll save in your 30s or 40s.<\/p>\n

For instance, a LearnVest study found that a saver who starts putting away $600 a year in a retirement fund at age\u00a025 will have $72,000 by age 65 \u2014 while a 45-year-old who starts savings $1,200 a year will have only slightly more than half that amount by the time he retires. Plus, the saver who started in his 20s would have to save just $50 a month, as opposed to $100.<\/p>\n

11. Employer matching for retirement savings is free money.<\/h3>\n

If your employer offers a contribution-matching\u00a0401(k)\u00a0or similar retirement savings plan, you should absolutely take advantage of this benefit. While it will make your paychecks a tiny bit smaller, claiming that contribution will also mean you\u2019re automatically upping your yearly compensation. Skipping out on these 401(k) contributions, however, means you\u2019re walking away from free money \u2014 possible thousands of dollars a year. It\u2019s an easy and nearly painless way to start saving for retirement now that will pay off big later.<\/p>\n

12. There are a lot of savings products out there, beyond just savings accounts.<\/h3>\n

If you\u2019re just stashing cash in whatever account your bank handed you,\u00a0you could be missing out on better savings vehicles. Here are the most common savings accounts banks offer:<\/p>\n