How saving money differs in your 20s and 30s
Have you noticed that your eating, sleeping and entertainment habits changed after high school and again after college? The same is true of your financial situation. With a different lifestyle comes different financial needs, which is why we’re bringing you a few dos and don’ts for these crucial decades.
Things to DO in your 20s…
Do contribute to a 401(k), one of the 9 financial habits we told you about earlier. How much should you save? At least as much as it takes to receive what your employer is willing to match. Beyond that, 10 to 15 percent of your pre-tax income is a great start.
Do lay a sound financial foundation by developing good habits. Contrary to what you may hear, how MUCH you save for retirement when you’re young isn’t as important as saving consistently starting as soon as possible.
Do find inspiration in growth charts / calculators like these. It’s hard to focus on something that is decades in the future, such as retirement, so calculate how dramatically your goals can be reached if you start early. For example, if you start saving $300/month in your 20s, you could have nearly $100,000 by the time you’re 50 (and that’s only factoring a less than 1 percent annual interest rate).
And one thing to avoid in your 20s…
Don’t ONLY save for your retirement. Many people in their 20s make this mistake. Since you can’t touch this money until you’re 59½ (with limited exceptions), you’ll need to make sure you have separate savings for emergencies and non-retirement goals.
Things to DO in your 30s…
Do ask yourself if you should buy a home. The median age of first time home buyers is 31*. While that doesn’t mean that age will be the right time for you, it does indicate that your 30s are a great time to start considering home ownership during this decade. If you’re a star student and are reading this section as a 20-something, good job. Because the money you save in your 20s will come in handy when it’s time to buy a home in your 30s. The down payment, closing costs and inevitable home repairs that pop up as soon as the home becomes yours add up quickly.
Do get life insurance if you now have dependents. It’s a bummer to dwell on, so don’t over think it. You and your family will appreciate the financial peace of mind it gives.
And one thing to avoid in your 30s…
Don’t be afraid to talk to your children about money. If you are among the 30-somethings with children, you can start teaching them as young as pre-school or early elementary school the concept of spending and saving. Playing imaginary restaurant or store with them is a great learning tool.
Update: check out how to save in your 40s, 50s and 60s!
Inspiration for article from Daily Finance
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Mr. Johnson is a VP/Financial Center Manager for UMB Kansas City. He is responsible for driving sales and relationship activities within the Walnut Lobby Financial Center. He joined UMB in 2007 and has 11 years of experience in the financial services industry. Mr. Johnson earned an Associate’s Degree from MCC. He is currently pursuing a Bachelor’s of Science Degree majoring in Management and Finance from Park University.