Saving money is important at all stages of life, and it may be most important in your young adult years. By getting into the habit of saving money regularly in your younger years, you can establish a lifelong habit that leads to financial security later in life. More than that, you are less likely to fall heavily into debt, and you may be able to retire sooner and more comfortably than your peers who do not start saving early in life. However, there are many challenges associated with saving money as a young adult. For example, you may have limited earning potential and high expenses related to college or starting a home and family. While there may be challenges, young adults who follow a few tips and make the effort to save can position themselves to lead a much more comfortable life down the road.
Live Beneath Your Means
In some cases, young adults may feel as though they simply do not have any money left to save each month, and some are even living partially off of credit cards. If this is the case for you, it is important to adjust your lifestyle so that you live beneath your means. This may include finding a roommate, moving to a more affordable home, driving an older car for a few years and more. This frees up money that could be used for savings.
Create an Automated Savings Plan
After you have identified some funds that can be applied to savings on a regular basis, take the next step of creating an automated savings plan. Many banks today allow you to set up automated bank transfers from one account to another. A smart idea is to transfer money from your checking account to your savings account with each paycheck you receive.
When you start saving regularly, you will adjust your budget and lifestyle to accommodate this practice. However, initially, it can be a bold change to get used to having less money available in your budget than you usually have. It is wise to start saving a small amount of money. After a few months, you may increase this amount slightly according to your comfort level. When you receive regular raises and promotions over the years, you can then further increase the amount you save.
Save Bonuses and Refunds
Another great way to increase your savings account balance without impacting your budget is to save all of your bonuses and refunds. This may include your holiday bonus from work, your tax refund check, rebates from items you purchase and more. It may even include holiday and birthday cash gifts you receive. This is money that you are not accustomed to having in your budget, so you should not miss it if you allocate it to your savings account.
At first glance, it can seem nearly impossible for a young adult to save money. However, by following these tips, you can start saving on a regular basis.
David Milberg is a financial analyst in NYC with nearly 3 decades of experience in the finance industry. He is a long-time owner of Milberg Factors, a factoring and finance company with locations in New York, California, and North Carolina.