When in your twenties, you are supposed get out from under your parents’ payroll and become financially independent. Most of us have a steady job with a career advancing prospect when we are in our mid-twenties. From your mid twenties to early thirties, it’s time to start saving money for security in the future. These are also the best years to make saving money a habit, so you don’t spend your forties and fifties being in serious debt. The money you save now can be used in the future for buying a nice house, a better vehicle, or for retirement decades from now. So, here are several suggestions on how you can save money while you are still young and enjoy great returns in the future:
Open Several Savings Accounts
You absolutely must have a savings account by the time you graduate from college. Saving at least a dollar a month is better than saving none. When you have a steady income, it’s recommended to open at least two savings accounts. You should reserve one fund for emergencies, such as illnesses, home repairs, accidents, or anything else that will leave you suddenly in need of cash. Use another account for regular savings that you don’t plan on cashing in on soon. If you have a particular goal, like buying a boat, open an account to save money towards your goal instead of borrowing.
Invest in a Fixed Deposit (Term Deposit)
A fixed deposit (sometimes referred to as a term deposit) is a safe and lucrative financial instrument for young people. Fixed deposits are like savings accounts, but you cannot withdraw money until a certain time period. It works like this: you deposit a certain amount of money, say a $100, at a bank, and the bank offers an interest rate for your deposit for a time period that usually spans between one to five years. The advantage of FDs is that you can get a much higher rate of interest than regular savings accounts. FDs are a largely risk free investment too.
Start Saving for Retirement
No one really thinks about retirement when they are thirty, but you really should. The earlier you start saving, the more money you will have in the future, and greater the returns will be. Also, if you experience financial difficulties down the line, you will still have some money saved for retirement. It’s recommended to save at least 15 percent of your income for retirement. When you sign up for your employer’s 401(k), the policy only allocates about 3 percent of your income towards retirement. This is too negligent to grow with good returns. So, you should either match your employer’s 401(k), or save the rest on your own.
If you are investing in stocks and bonds, now is the time to diversify your investment. When you are young, you can afford to take risks, because you still have good income earning potential to earn back any loss. You won’t have this luxury when you are older.
Use the above suggestions to start saving now to ensure your financial security in the future.