Savings Goals in Your 20s
With age comes more responsibility and larger expenses. It’s important to begin saving in your 20s or even sooner to have more financial flexibility in the future and ultimately fulfill your goals. Whether you want the extra financial flexibility to travel, buy a home or even further your education, developing a good savings plan in your 20s could be the key.
Landing that first big job in your 20s will give you the financial security and confidence needed to make a habit out of saving. Take this time to develop an emergency fund, plan for purchasing a home, save for retirement and make smart investments early on in your adult life. This can be overwhelming for a busy 20-something, which is why Piedmont Advantage Credit Union is here to help. Let’s dig into some savings goals to have in mind in your 20s.
Make a habit of saving
Now that you are out of school and making your own money, you can afford much more than before. But with cashflow comes the responsibility to spend and save wisely. Use these savings tips from Piedmont Advantage Credit Union to begin building your savings in your 20s.
- Watch your spending: Between online purchasing and monthly subscription sites, it’s easy to overspend. Combat those tempting purchases by developing a budget and healthy savings habits. Keep an eye on your budget when spending.
- Track your spending regularly: Jump-start this plan with a daily spending record. Tracking purchases in real-time can help you to evaluate spending and create a realistic savings plan to continue beyond your 20s.
- Avoid impulse buys: To curb impulse buying, always research products before purchasing. You never know when there could be a more affordable option. It also helps to make a list before grocery shopping so you focus on buying only what you need.
- Save 20% of your earnings: Habitually put away 20% of your paycheck into a Piedmont Advantage Credit Union savings account. If you already have a savings goal in mind, a budget calculator can help you to determine exactly how much to put away per pay period. As your income grows, so will that 20%. You will begin to see your savings build, which will help you plan for the future and build your emergency fund. Student loan debt and expenses may make it tough to put away the full 20%, in which case you can evaluate your fixed monthly expenses—such as cable, cell phone plan and rent—and look for ways to cut back.
Keep an emergency fund
A sudden illness, accident or even the loss of job are unavoidable circumstances and come with expenses that can thwart your financial plans. Before you begin investing in the stock market or saving for retirement, build an emergency fund. Think of this as insurance for your finances. Use these helpful tips for building an emergency savings fund:
- Selecting a savings account: Your emergency fund should be accessible and easily turned into cash. Whether or not you currently have a savings account, consider a high-yield savings account or money market account to get the most out of your emergency fund.
- Aim to save 3-6 months of living expenses: A rule of thumb for most financial experts is to have a large enough emergency fund to cover three to six months’ worth of living expenses. To calculate this, keep a budget sheet that lists how much you spend per month on housing, utilities, food and loan payments, along with the percentage of your income saved. How much to save is going to depend on both your income and expenses. If you need help organizing your monthly budget, contact a PACU Financial Advisor.
Purchase your first home
You may not want to or be able to purchase your first home in your 20s, but it helps to start saving for a down payment as early as possible. Once you have begun to save, you can explore Piedmont Advantage Credit Union’s several mortgage options for first-time homebuyers. If you want to avoid paying private mortgage insurance, or PMI, then you will need to put down a 20% deposit on your prospective home. Not sure that means in North Carolina? The average home price is $208,001, so 20% of that is $41,600. Yes, a house is a big expense, so saving early will put you in a better position when you’re ready to purchase a home.
Reduce your debt
It’s also important to keep yourself out of debt before purchasing a home, a car or something else big. Your credit score will come into play when getting pre-approved for a mortgage or car loan. Use this time in your early adult life to build your credit. A secured credit card or credit builder loan could help get you to a fair, good or great credit score. Other ways to ensure a good credit score are to keep credit card debt as low as possible and to pay your bills on time. To make sure you are paying each bill on time, set up automatic payments for your auto loan or student loan with Piedmont Advantage.
Start investing in your retirement.
It’s hard to think about retirement when you are just entering the workforce, but it’s important to start saving early on because most Americans nearing retirement age now have just over 10% of what they will need. Does your employer offer a retirement plan like a 401(k) or IRA with matching contributions? If so, sign up immediately to take full advantage of these additional savings. If you do not have access to these contributions through your employer, set up a retirement account with Piedmont Advantage Credit Union with direct deposits from your checking account.
If you start saving in your 20s, you will be amazed by how much you can save. Use our retirement planning guide to see for yourself. Time and compounding interest are in your favor in your 20s. In other words, whatever you put away early on will grow exponentially. Plus, if you start investing with the help of a financial advisor, you will understand how a long-term investment strategy can pay off later on.
Life is exciting in your 20s and financial knowledge truly is power. A fully established savings plan will you give you a leg up on attaining those financial goals in your 20s and beyond. Even if you aren’t thinking about purchasing a home or starting a family yet, life will move fast, so it’s smart to make a habit of saving as early as possible. Contact a Piedmont Advantage Credit Union representative to get advice on how to grow your savings starting now.