Young adults say they want to save, but it’s unclear if they are.
While 59% of Americans ages 18 to 25 say a well-funded savings account is a top priority, according to a survey commissioned by financial software firm Intuit in April, many are struggling to reach that goal.
Among Gen Z adults ages 18 to 27 in the U.S., only 15% were regularly putting a portion of their paycheck into a savings account, according to a survey by Bank of America released last year, and less than half of U.S. adults surveyed by Bankrate earlier this year said they could use their savings to cover an $1,000 emergency expense.
So, just how much should you have in your bank account?
Generally, you should keep enough money to cover a month’s worth of bills in your checking account, and experts say to aim to have enough in your savings account to cover three to six months of expenses in case of emergency.
After that, you can start looking toward saving for retirement, Nathan Sebesta, a certified financial planner and owner of Access Wealth Strategies, a financial services firm in Artesia, New Mexico, tells CNBC Make It.
Here are three tips on how to start building your savings.
1. Focus on yourself
The biggest trap Sebesta believes young adults can fall for when managing their money is letting spending rise with increases in income, he says. A raise can be great for saving, but if you buy a new car or rent a nicer apartment because of it, there may not be any left to save.
Young adults may feel pressured to financially keep up with friends or people they see on social media, and they often fail to recognize that every financial situation is different, Douglas Boneparth, a certified financial planner and founder of Bone Fide Wealth, told CNBC Make It in August.
“If you focus on yourself and work on what you can control, you’re going to be better off for it. Saving is great, but the discipline around how you manage your money is far better,” Boneparth said.
2. Track your spending
Without knowing where your money goes each month, it’s nearly impossible to make informed decisions about saving, investing or paying off debt, Tracy Sherwood, a CFP in Clarence, New York, told CNBC Make It in November.
Going through your bank and credit card statements manually or with a budgeting app can not only help with identifying and cutting unnecessary expenses, but it can also serve as a baseline for any future financial decisions you decide to make, she said.
3. Make saving a habit
A common budgeting model says to put 50% of your paycheck toward essential costs like food and rent, 30% to wants that may not be essential like ice cream after dinner and 20% toward savings and paying down debt. But that doesn’t always work for everyone.
After paying for essentials, aim to consistently put a portion of your income toward your financial goals — even if it’s far less than 20%. “Even starting with $20 a month can make a difference,” Ramit Sethi, a self-made millionaire and host of Netflix’s “How to Get Rich,” told CNBC in 2023.
You can also set up automatic transfers so the money comes directly out of your paycheck each month, with a goal of gradually increasing your savings rate as your income grows, he said.
“If you are in your 20s, you have an amazing opportunity, even if your earnings are not that high, to set up your habits right,” Sethi said.
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