My parents always told me to save my money every time Christmas or a birthday would roll around and some cash would find its way into my pocket. “Are you going to put some of that in the bank?” I somberly went to the bank and the cash was quickly gone. I never understood the true benefit of it until now.
Saving your money at this age is very important. So what should you do when you land that job? It’s important to start your saving early if you want to be able to have money around in the future, either for retirement, a child’s college fund or for availability in emergency situations. Many adults nearing retirement today have not saved enough money to live on during retirement. Many feel they can rely on social security alone to provide them with enough income to live on during retirement. This may be doable, but for many it is not enough. According to the Social Security Administration’s website, the average monthly payment per month is $1,294, or approx. $15,000/year. Is that enough for your retirement plans?
If you’ve followed the news the last couple years you know there are many uncertainties for how long the social security fund will last future as more people live longer and more and more from the baby-boomer generation retire. So how can you avoid the risk of social security and ensure you have income to use when you retire? The key is starting early!
Keeping your costs low in your early work years is important. Some ways to keep your costs low include reducing how much you eat out and living with a roommate to keep living expenses low. With more of your income available you can contribute more to either paying off your student loans, or increasing your savings. Paying off your loans is very important because of its impact on your credit score. However, if you are able to make your monthly payments and have money left over, you may want to think about saving it. If you don’t have to pay off loans I recommend saving 10% of your paycheck.
Try to save enough that can cover up to 3 months of your expenses as an emergency fund. This way, if you are laid off you have some money to live on while you search for a new job. If you are able to reach that number, I would place some additional money away to cover unforeseen expenses such as car maintenance. I recommend $1000-$2000. If you have to use these funds make sure you replace them.
Another important thing to do is to explore possible retirement accounts like a 401(k). Do some research and ask your employer about potential retirement accounts. Some companies even offer matching contributions to these accounts. It seems a long way off, but the sooner you start saving your money, the more financial stability you can enjoy later in life.
Article by Erik Witt, SMMC Volunteer