Events To Save Money For That Every Millennial Should Know

Pexels

When someone starts talking to you about financial savings, do you hit the mental snooze button? We really don’t blame you. After all, most of us aren’t exactly in the best spot financially compared to our parents’ generation, and thinking about growing a savings account when you’re already kind of struggling to pay rent doesn’t sound too appealing.

But don’t worry — we can compromise. Here are the three most major life events that — yes, three — you should start saving for ASAP. And it doesn’t matter how loose or tight your current budget is. It just matters that you start saving.

1. An Emergency Or Unexpected Purchase

As unfortunate as it is, most of us experience emergencies or big, out-of-the-blue purchases at least once in our 20s. From company layoffs to a sudden death in the family, shit can hit the fan real quick. And how it affects you (other than the obvious emotional toll) can heavily depend on how prepared you are to face it financially. Enter: the emergency savings account.

What’s the purpose? “To protect you against a house scare, or if your car breaks down, or a job lost, or if you need to get a plane ticket somewhere far,” Ariel Anderson Fortunato, a certified financial planner at Society of Grownups told Swirled. “If it happens and you’re not prepared, you’ll rack up credit card debt.”

Here’s how to build emergency savings: Create a completely separate savings account just for emergencies, and open that account at a different bank. “You’ll feel like that money isn’t super reachable. It’s out of sight, out of mind and it’s meant to be used only for those emergencies,” Fortunato said.

Exactly how much should you be saving? Aim to save three to six months’ worth of living expenses in your emergency fund. Of course, this may take different people different lengths of time to achieve, but make this goal a priority. It also depends on your own life and its many facets. Do you have a car? Do you rent or own a home? If you’re pressed for cash, start with at least $20 a month. Saving even just a little is better than nothing, and you’ll save three months’ worth of living expenses eventually.

2. Retirement

Yeah, yeah, yeah, retirement seems like a lifetime away. But one day, it won’t be, and you’ll be old and ready to chill. If you haven’t started preparing financially, guess what? Your geriatric self is not retiring. That might not seem like a big deal right now, but do yourself a huge solid and listen up.

What’s the purpose? “Pension plans are dying and the future of social security is uncertain. It’s important for individuals to self-fund their retirement,” Fortunato said. “The good news is that if you start early, you have time on your side.”

Here’s how to build retirement savings: There are lots of different types of retirement savings programs. The 401k, for example, is one of the most popular. If you’re not familiar with the programs, check out this explainer from The New York Times that breaks down each one and to whom they’re typically applicable. Once you’ve identified the program most relatable to you, ask your company’s HR department (or designated person on the team) if the company provides that plan.

Sometimes, employers who offer 401k programs will not only allow you to stash money away in the program before taxes are taken out of your paycheck, but also match the amount you add. This means they might contribute up to a certain percent of your salary with money from their own funds. Basically, they’re giving you free money for your retirement account.

If your employer doesn’t offer any retirement plans, don’t fret — you can start your own independently. Your biggest options are an IRA, Roth IRA, SEP and Solo 401(k) plan. To start your retirement plan, just read up on each and choose one. Check out different companies to open your plan with, too. For instance, Ellevest is a great option.

Exactly how much should you be saving? Start with a goal in mind so that you’re on pace to retire in style. Aim to save at least the equivalent of your salary in your retirement account by the time you’re 35. If you’re single and have an IRA or a Roth IRA, you can contribute up to $6,000 in 2019. If you’re single and have a 401(k), the annual contribution limit is $19,000 for 2019.

Whatever you do, contribute to a retirement account. If you have an employer-sponsored account, it’s smart to sign up right away. That money is taken out of your paycheck before your taxes so you end up saving even more money in the long run. Plus, you’ll most likely forget that the money is even missing from your paycheck. Deducting a certain amount from your paycheck each month for retirement will make saving feel like second nature.

3. Your First Big Investment

If the previous two life events don’t seem obscure to you, we bet investing does. Investing money can seriously help you build your wealth and have more money in the future. We’ll get into the nitty-gritty details another time, but all you have to know right now is that you do have the power to invest money and potentially enjoy a big profit later in life. You just might not be ready to take that leap yet, so prepare for it.

What’s the purpose? Fortunato said that even though you’re likely not ready to jump into a big investment, you should still learn about your options. Starting small is a perfect solution. “You’ll learn the lingo and and how investing works, so when you decide to invest more, you’re comfortable and you’ll know more about it.”

Here’s how to build investment savings: Again, we won’t get too deep into every single option you have, but a good way to start is to look into online platforms and apps that make small-risk investing easy. “There are a lot of online platforms and apps where you can invest as little as $5,” Fortunato said. “It’s not for the elite — it’s for everybody.” Try Acorns or Robinhood to get started with as little as just $5 — it’s really that affordable.

Exactly how much should you be saving? How much you save for your big investment is totally up to you, and it depends solely on your financial goals. But a good rule of thumb, Fortunato said, is to consider when you want to use the money that you’re investing. Is your big investment meant to fund your retirement or a down-payment on a new car within the next five years? Consider your short- and long-term goals before determining how much you want to save.

Start saving for these three major life milestones now and you’ll be living a financially free life later on. Have you started saving for these events yet? Tell us about your strategies in our LinkedIn Group!

24 Savings Accounts That’ll Seriously Help Your Money Grow

3 Easy, Money-Saving Budget Templates You Can Create In Google Sheets