Young employees today have enough to worry about: underemployment, student loan debt, an uncertain economy and the challenging transition from full-time student to workforce employee, for starters.
Then there’s this interactive graphic from The Guardian detailing the Millennial deficit compared to past generations.
It can feel daunting to try to budget your money wisely with so many forces seemingly working against you. But rest assured there’s hope in the beacon that is saving money.
Here’s why saving should stay near the top of your budget no matter what shape your finances are in today.
Start early. Time is your greatest ally.
Here are a few benefits to saving earlier in your life:
- Compound interest, one of the most powerful drivers of long-term wealth building. Compound interest earns interest on interest, meaning your savings will grow faster and faster with time. The more time you have, the faster your savings will increase.
- Smaller payments. The longer you wait, the more of your income you will have to devote to savings to be able to live comfortably. Starting earlier enables you to save a little over a longer period of time, reducing the impact on your quality of life. As a bonus, this will instill a savings habit that will help prepare you for anything you encounter in life.
- Fewer competing expenses. As you progress through life you will take on a wider range of routine expenses, such as paying off a mortgage, funding children’s college education, or taking care of elderly parents. These can make it harder to give money to savings. When you’re younger, you have more freedom to amass your savings.
- Protection and peace of mind. Having emergency money stored in savings will help you feel better every day knowing you are covered in case of an accident. Saving a portion of every paycheck (start small and increase incrementally), you will soon find that your savings have grown beyond emergencies into retirement money, vacation money and the like.
Easy techniques to save now
Here are some low-investment, high-return techniques to build savings.
- Pay yourself first. Set up a savings account and set an automatic payment to that account on the first of every month, or every time you receive a paycheck.
- Max out your employer’s 401(k) or tuition reimbursement program. If your employer offers a 401(k) with a matching program, make sure you match your employer’s contribution per paycheck, no matter what. It’s free money. If you have high student loan debt, some employers offer tuition reimbursement as part of your benefits package. Check with your employer to see if this would be a helpful option for you.
- Adjust your perspective on saving. Think of saving as winning, not a chore. Think of saving as ensuring that you will have a better, more independent future for yourself and your family. Instead of asking if you can save 20% of your income (which might seem tough), ask yourself: can you still live on 80% of your income? That sounds more doable, doesn’t it?
- Meet with a financial professional. Per a 2014 study from Natixis Global Asset Management, employees who got input from financial professionals contributed 22% more of their incomes to retirement accounts than those who went without input. Employees who sought financial input were 20% more likely to understand how much money they needed for retirement than those who didn’t get input. We encourage Unitus members to speak with Members Financial Services about retirement saving, investments, insurance and more.
For more wisdom on saving, I have a few trusty sites bookmarked, including America Saves and The Simple Dollar and WiseBread. I also listen to Unitus’ own Navigating Your Money Podcast on the way to and from work. Good luck and remember that it’s never too early (or too late) to start saving!
Posted by: Catherine Landgraf
About the author: Catherine just graduated from the University of Oregon and is back at Unitus working as the summer marketing intern. She is excited to begin her career and hopes to find a job that involves public relations or marketing. When outside of the office, Catherine enjoys spending time with family and friends, cooking and good cheer!