12 Money Saving Strategies for Young Adults
Millennials can get ahead with these simple money-saving strategies.
If you ask a 20-something about their personal finances, saving is typically not their first priority. Young adults tend to be more concerned about dealing with student loans or buying the latest fashion pieces or gadget. All that on top of the fact that most entry-level jobs don’t pay much, so there is not much left over to stash away in an emergency savings or retirement plan.
This is where MissMoneyBee.com comes in. I have devised a list of 12 simple strategies that young adults can incorporate into their money management habits in 2012 so they can save more.
1. Make a debt management plan for your student loans. Sit down and find out how much you owe in student loans. Know the interest rates for each loan in addition to the repayment schedule. You need to know the long-term effects that your student loan payments will have on your personal finances. If you have loans from multiple financial institutions, you may be eligible to consolidate your loans into one large loan through loanconsolidation.ed.gov. Thanks to President Obama, you may get the average of all of your interest rates and end up with a lower interest rate. You will only get .5% interest rate break on your student loans if you even qualify, but if that happens, use that opportunity to save.
2. Start saving for retirement. I know, I know – most people in their 20’s could care less about retirement. But the truth is, that now is the time to start saving if you want to be financially secure when your 60’s roll around. Talk with your employer about their 401k plan and at least start investing 5- 6% of your paycheck. Many employers match half of the percentage up to 3%. So if you put away 6% and they match it at 3% that’s free money!
3. Open a savings account with a credit union. Open a savings account in a separate bank from your regular checking account. Now most money experts will tell you to save $100-$200 a month but realistically, on a $30,000 to $40,000 annual income, that is hard – especially for beginner savers. I suggest that you save just $50 a month for the first six months and then act as if the money doesn’t exist. Also, think about opening your emergency savings account with a credit union. This way, when you go out of town on vacation, you won’t be tempted to spend the money because you cannot access it. Most credit unions are local and don’t offer hundreds of locations like national banks.
4. Start saving small. Saving even $20 a month is better than nothing. Get in the routine of saving a little bit of money each month. Then after 6 months, increase the amount you put away in savings. Saving is something that is very new for most young adults, but it is a necessity if you want to be financially successful.
5. Cut back on shopping. This tip was hard for me at first, but it’s a must. Those $25 blouses and cute heels add up fast so try to cut back by at least 50% — you will be amazed how much extra cash you have to save.
6. You don’t need the latest gadget. Young adults love to flaunt the latest tech gadget to signal how ‘cool’ or tech-savvy they are. But honestly, it doesn’t matter and only puts a hole in your wallet. The iPad3 is rumored to come out this April – but if you already have an iPad, my advice is to save your $500+ for something more important like a medical savings account or retirement. Impress your peers with your financial knowledge, rather than with material items.
7. Resist splurging. If you get a bonus in 2012 or just received your income tax return money, save it! Don’t splurge it on another vacation with friends. Think about your future and remember that you never know what could happen – you could break your arm, crash your car, or your house could get burglarized. You want to be prepared for any sort of emergency.
8. Car pool with friends. I’m sure you have noticed gas prices have jumped quite a bit in the past two months. Many economists are expecting gas to hit $4.00 by April or May. This is something you need to plan for now. Carpool with friends to work to help level out the increase in traveling costs. This way you won’t have to dip into your savings.
9. Use coupons. Couponing is typically more popular with mom’s but I recommend that if young adults incorporate couponing into their spending habits, they could cut down on the cost of groceries significantly and put that money towards retirement.
10. Bank for free. Make sure you don’t pay $10-$15 monthly fee that banks may start to charge you once you graduate college. There are plenty of free checking account plans available even after you are no longer a college student.
11. Use a cash back debit card. PerkStreet Financial, an online-only bank offers a debit card with up to 2% cash back. Any little extra money you can make will surely help increase your savings funds.
12. Review your budget monthly. At the end of each month, review your budget and see what you actually spent your money on. This will help you pinpoint where you may have overspent and where you can save more the next month.