[vc_row][vc_column][vc_column_text]Personal finance is important, and the earlier you get started the better you’ll be as you get older. Being a young adult, it can be hard to know what is right from wrong when it comes to finances. Spending money is alluring and saving isn’t quite as appealing.
But did you know that saving more at a young age can dramatically change the course of your life? Check out these stats.
- According to a study by Vanguard, individuals who start saving for retirement at age 25 will have about twice as much money saved by age 65 as those who start saving at age 35.
- The study also found that if an individual saves 15% of their income starting at age 25, they will have about 70% of their final salary saved by age 67. However, if that individual starts saving at age 35, they will have only about 40% of their final salary saved by age 67.
- According to a report by Bank of America, if an individual saves $5,500 per year starting at age 25, they will have $1.2 million saved by age 65. However, if they start saving at age 35, they will only have $600,000 saved by age 65.
- According to a report by the Consumer Financial Protection Bureau, if an individual saves $200 per month starting at age 25, they will have over $1 million saved by age 65. However, if they start saving at age 35, they will only have about $400,000 saved by age 65.
- The earlier you start investing, the more time you have for your money to grow. Investing $1,000 at age 25, if it grows at a 5% annualized rate, will be worth $6,716 at age 65. But if you start investing at age 35, it will only be worth $3,326.
With those statistics in mind, it is easy to see why personal finance matters for young adults. Let’s get into these tips so you can have better finance habits for a better life. You might be surprised by some of these tips. Not everything involves strictly spending or saving money, but can impact your bank account dramatically.
- Start saving early: The earlier you start saving, the more time your money has to grow. If you start from a young age, your money will have more time to compound. Especially when interest rates are high! A few good high interest savings accounts are American Express, Marcus, and Robinhood.
- Set financial goals: Identify what you want to achieve financially (e.g. buying a house, saving for retirement) and create a plan to reach those goals. If you consistently work and chip these goals down, you can reach them. Seeing your progress makes it easier.
- Create a budget: Understand where your money is going and make sure you’re not overspending. It’s easy to spend on the wrong things. Looking at your credit card statement and bank accounts can help you to see where everything is going.
- Pay off debt: High-interest debt, such as credit card debt, should be a priority to pay off. Do not take on too much debt for a car or other expenses. It’s ok to buy used and be more frugal.
- Build an emergency fund: Set aside money for unexpected expenses, such as job loss or medical bills. This is also called a rainy day fund, and having a savings of about 6 months of expenses is a good start!
- Invest for the future: Consider putting some of your savings into investments that have the potential for growth, such as stocks or real estate.
- Be mindful of fees: Avoid high-fee investments and bank accounts, as they can eat into your returns over time. Avoid ATM fees and try to carry cash if you need it.
- Get insured: Get health, life, and disability insurance to protect yourself and your assets. While it can be frustrating to pay a lot of money monthly for insurance, it saves you in the long run.
- Learn about financial products: Understand the basics of different financial products, such as loans, credit cards, and insurance, so you can make informed decisions.
- Seek professional advice: If you need help, don’t be afraid to seek advice from a financial advisor or planner.
- Live below your means: Avoid lifestyle inflation and try to live on less than you earn.
- Use credit responsibly: Understand how credit works and avoid overusing credit cards or taking on too much debt.
- Start saving for retirement early: The power of compound interest means that starting to save for retirement early can have a significant impact on the size of your nest egg.
- Be mindful of taxes: Learn about the tax implications of your financial decisions and take advantage of any tax-saving opportunities.
- Avoid scams and fraud: Be vigilant and protect yourself from financial scams and fraud.
- Keep your financial records organized: Keep track of your income, expenses, and important financial documents to make it easier to manage your finances.
- Be aware of your spending habits: Be mindful of your spending habits and try to identify areas where you can cut back.
- Be open to learning: Stay informed about the financial world and be open to learning new things. Your education can take your farther than you could ever imagine. Never stop learning and always work to sharpen your existing skills while building new skills.
- Diversify your investments: Diversify your investments to minimize risk and maximize returns. You should try to have 5-10 streams of income, whether it is active or passive, if possible.
- Be patient: Building wealth takes time and patience, so don’t get discouraged if you don’t see immediate results. It’s ok to make mistakes and fail on your journey to building wealth too! Many people think it will happen in a straight line or a very simple manner. This is not the cast for most, if not all people. You have to make mistakes to see the right path and income streams for you.
To summarize, beginning to save your money and invest early can have a significant impact on your financial future. By setting financial goals, creating a budget, and investing for your entire life, you can put yourself on a path to financial success. It’s also important to be mindful of taxes, avoid scams and fraud, and seek professional advice if needed. Remember that building wealth takes time and patience, and consistency is key.