As you go through life, your income, spending and financial goals will continue to evolve. But no matter what life stage you’re in, building your savings should be a priority. Here are a few strategies to help you save more whether you’re in your 20s and just starting out or in your 60s and getting ready to retire.
- 20s – A lot of major milestones typically happen in your 20s. Many people in their 20s are finishing up college, starting a career, paying down student debt, getting married, and, perhaps, saving for a down payment on a new home. During this time, it’s also an important time to start contributing to a 401k or Roth IRA plan. The money you save in these accounts during this decade of your life is worth the most because it will have more time to earn interest and/or grow with the market. Make it a priority to contribute as much in your plan as possible, and if your employer offers a match, contribute enough to get the full benefit.It’s also a good time to start laying the foundation for good financial habits. Avoid living beyond your means and racking up credit card debt. Although many people in their 20s earn smaller paychecks, get in the habit of sticking to a budget. If you find yourself tempted to pull out your credit card to pay for something you can’t really afford, take a few minutes to consider if you really need the item and if it’s something you’ll even use in a few months or years. Sometimes taking a few moments to reflect is all you need to put down your wallet and walk away. Remember – living within your means at this stage in life will provide peace of mind and security and set you up for stronger finances later in life.
- 30s – During this decade, you’ll likely start hitting your stride financially. But you’ll need to rethink the budget you set in your 20s to take into account new priorities. For example, in your 20s, you probably spent more money on travel and entertainment. In your 30s, you may have more family expenses and need to shift more money toward daycare and groceries. It’s also crucial to work on increasing your rainy day savings. I recommend having six months take-home income socked away, but you can start with a smaller amount and slowly build your fund over time. For tips on how to build a rainy day fund, read Guide to Building a Rainy Day Fund.
- 40s & 50s – This is the time most people begin to focus on retirement and saving more in their 401k and Roth IRA accounts. It’s a good time to take a look at your investments and make sure your plans are still producing well and are in line with your retirement goals.Although you’re likely earning more during this life stage, I caution against upsizing. Although it’s tempting to buy a larger home or more expensive car, it’s smarter to put any extra money you have in your savings accounts.
- 60s – At this point in life, you’ll start thinking about what your lifestyle will be like once you retire and how you’ll sustain it. It’s time to get a good understanding of what your income will be, which accounts you’ll draw from and the types of insurance you might need. Understanding these numbers will help you determine what age you can retire. It’s not uncommon for people to downsize at this point – often because they realize they need additional income and equity to meet their retirement goals.
- 70s and beyond – Although you’ll probably retire before or during these years, it’s important to keep saving. The first year of retirement almost always requires adjustments but the sooner you address your finances, the better off you’ll be in the long term.
No matter what life stage you’re currently in, a personal banker or financial planner can help you create a savings plan that will help you achieve your goals. It’s always a good time to start saving – and the sooner you start, the quicker you’ll be on the path to financial security.