Save, Save, Save!
By Nicolette S.
Is saving earlier more beneficial? When should we start saving and investing in our future?
The answer is NOW. The best time to start thinking about your retirement and future is right now. The earlier we begin to save and invest the more money we can accumulate as time goes on. It is never too late!
Time is money. Everyday our money isn’t saving or investing we are losing out on an opportunity to make money we didn’t have before. The reason behind this concept is compound interest. Compound interest is the additional interest you earn from the interest earned on the initial deposit.
Essentially you can earn interest on top of interest. At a young age we have the most valuable asset, TIME! Jude Wilson of Wilson Group Financial believes, “Compound interest is the most powerful force in the universe.” Compound interest over time can help us build long-term wealth.
Young people have the luxury of establishing good financial habits now. This means spending less and saving more. The most common mistake that we make is spending almost everything we earn. If you pay yourself first, before spending, you are less likely to blow through it all.
One good rule of thumb is 50% of the money you make goes towards necessary expenses, at least 20% should go to savings and 30% can go to wants. There are many different variations of this rule but following a guideline can help keep you on track.
Another budgeting guide is the 30/30/30/10 rule where only 10% of your income goes to extras or fun things while the other 90% gets divided into savings, expenses, and lifestyle. If we deploy one of these financial strategies into our lives now, we can grow to be financially responsible adults. As we get older, we should also increase the amount we save in order to maximize our retirement. Especially as we age, we are earning more so it may not be as noticeable.
How to Save
The easiest way to begin earning interest is to open a savings account. Even if it’s the simplest way to begin and it won’t earn a ton of money, saving for the future is a long-term plan. Don’t expect to gain a large amount of money right away. But remember the more you save the more you can get out of it!
Some examples of other ways we can save now is by putting aside money into a Money Market account or a Certificate of Deposit (CD) account. Money Market Accounts come with more restrictions but higher interest rates than savings accounts. Money market accounts allow for a fixed number of transactions per month and must have a minimum balance. Some Certificates of Deposit pay higher fixed interest rates than both savings and Money Market accounts. They are one of the safest savings accounts, but the money is untouchable for a length of time. The time ranges from short-term such as six months to long-term such as a five-year term.
Just remember any way you can find room to save is beneficial. The most important thing we can do is to invest in ourselves and get into the habit of saving!