The Importance of Saving Now
Regardless of your age, saving and saving early is one of the most critical and proactive decisions a young person can make. Aside from developing good financial habits, there are many benefits to saving when you are young.
One massive advantage to saving when you’re young is that time is on your side. With this advantage, you can truly harness the power of compound interest. Setting aside just a little money each month in an IRA, 403b, or other type of savings account for retirement can make the difference of thousands of dollars down the road.
In addition, saving helps individuals solidify financial security. Life has a way of throwing unexpected expenses our way. Whether this is a medical bill, unexpected home expense or car repair, having a rainy day savings account can help greatly to offset these expenses.
The American Heart Association stated that 84% of adults feel stressed about finances. Stress can be a slippery slope to a myriad of health issues. Establishing good financial habits early in life will help to assuage financial stress later on in life.
Money Saving Tips When You’re Young and Broke
The power of saving lies in small changes. Especially over time, small changes can add up to big savings! Keep reading for some tips and tricks that you can easily implement into your daily life immediately!
- Budget and Reflect: Start by creating a budget and figuring out your individual goals. When you budget, you assess exactly how much money you have coming in and going out each month. You want to make sure that the money you have going out does not exceed the amount that comes in! Once you have this information, reflect on your goals. In this case, it helps to be as specific as possible. Perhaps you want to save to purchase a new car, home or other type of big purchase. Maybe you are just looking to establish a reliable savings fund or to start investing. Regardless of your goals, once you have them organized, you will find that you can best chart your path to success.
- Prioritize Essentials: A huge part of saving is acknowledging the difference between a “want” and a “need.” It is important to prioritize essential expenses, or expenses that you must spend money on each month. Things like rent, car title loans, utilities, and food are non-negotiable. You must make sure these expenses are accounted for each month before addressing your “want” expenses. Entertainment, dining out, and clothing expenses can often fall under “want” expenses. This is not to say that you need to eliminate these expenses altogether! Rather, you must ensure that you can adequately cover your required expenses while in your budget before addressing your wants.
- Cook at Home: With food prices on the rise, the cost of dining out is now higher than ever. Cooking at home is a great way to save money, especially if the meals that you are making can yield some leftovers. This does not mean you need to abandon all fun! Consider eating a meal at home and meeting friends for a simple dessert or to split an appetizer. These small changes can add up to money in your pocket!
- Build an Emergency Fund: Do not underestimate the power of a savings account for emergencies! Emergency expenses will undoubtedly pop up throughout life. Having an emergency savings account can help prevent you from having to put a large expense unexpectedly on a credit card. Many credit cards carry high interest rates, and you will end up paying much more over time. It is a good idea to keep a savings account with a minimum balance to cover your insurance deductible.
- Explore Side Hustles: If you are just making ends meet, consider ways to bring in some extra money each month. Driving for UberEats or DoorDash, even once a week, can help to provide you with some extra money in your account. If driving does not appeal to you, consider how you can market a skill such as writing, data entry, or crafting!
Remember Your “Why” In Savings
It is easy to stay disciplined when you have a goal in sight! Skipping dinner out with friends for a homemade meal does not feel like a punishment when you are focused on the end goal. Not only will saving help you to develop financial discipline, but this will also help to build your credit score and open the door to countless more opportunities!