We all have different financial goals, but there are some things to save for that should be on everyone’s list.
Saving money is important because it can help you avoid debt, get you out of a financial emergency and reduce money worries.
Things to save for right now
Knowing what you’re saving for is motivational and there’s more chance you will achieve your target if you have a goal to aim for. Take time to discuss and agree on things to save for with your partner and family. Financial planning in your 20s is key to your future.
Here are 10 reasons to save money right now.
1. Pay off debt
If you have a credit card or loan debt, the first thing to save for is paying it off. Leaving debt to accumulate interest will make it harder to get rid of and take longer.
Write down your list of debts and how much you owe. Prioritise the highest interest or most expensive debt and focus on paying that back first.
Once you’re debt-free you can start saving for a better future. Having access to savings going forward will prevent you from going into debt again.
Tip: Go through your current outgoings and find ways to cut spending on unnecessary purchases. Put this extra money into a different account every month then use it to pay off a chunk of debt.
2. Emergencies: things to save for
Emergencies are unforeseen and can be expensive.
From medical emergencies to a car accident or a burst pipe, having an emergency fund pot will give you peace of mind that you don’t have to rely on a credit card or loan if something happens that is out of your control.
Tip: Even if you have insurance to cover medical bills or urgent house repairs, an emergency fund can help to pay the excess or any additional costs that you might have to cover yourself.
Start by putting a certain amount into an emergency account then regularly top it up.
3. Buy a home
Buying a home requires some serious saving. Owning a house will also be one of the biggest things to save for in your lifetime, which makes it an important one.
How much you need to save will depend on the type of house you want to buy and its location.
Regular saving is much more effective than one-off transfers into your savings account.
Don’t try to save too much as this will result in you giving up on your goal.
The bigger the deposit you have, the less you will need to borrow and the lower the interest rate will be.
Tip: Cut out any unnecessary expenses, put any extra money into an investment account and keep your credit score in good shape.
Budgeting in your 20s may be the last thing on your mind, but your future self will thank you for it.
4. Loss of a job
Having a cushion of money to fall back on if you become out of work or made redundant will eliminate the financial stress of not having a job and ensure the mortgage and bills will still be paid for.
A fall-back fund will also take the pressure and stress out of finding new employment quickly.
Tip: Add up your monthly expenses then multiply them by how many months you’d like covered if you were out of work, for example, three or six months.
The total will be how much you ideally need to save for any future potential periods of unemployment.
It may seem that there are lots of other, more immediate, things to save for but don’t underestimate the importance of saving for your retirement.
The amount you save now will impact how comfortably you live once you’ve given up work.
People are living longer, which means the time you spend retired could be 30 years or more.
Even if you decide not to retire straight away, you might choose to do a different job or less hours so your retirement pot will help you make up any financial differences.
There are lots of investment choices available to you where you can decide how your money is invested, but the important thing is to start saving.
It will be one of the best decisions to make in your 20s.
Tip: Start a retirement fund as early as possible, whether that’s through matching a contribution made by your employer or a special retirement account if you’re self-employed.
The earlier you start saving the more financial security you will have later in life.
6. Future education
The cost of going to university is a concern for both parents and students.Tuition fees range from $5,000 to $50,000 (£4,074 – £40,746) per year. Factor in accommodation and living expenses and it becomes very expensive.
A future education fund can take away some of the financial pressure and remove any doubts about going.
The earlier you start saving for your child’s education the more money you will have to provide your child with different education options.
Tip: Open a children’s savings account as soon as your child is born and start contributing to it on a regular basis.
It doesn’t matter how much you add, it will soon grow into a pot of money that can be used to help them get the best financial start in life.
You’re never too old to learn a new skill or build on your qualifications.
Education costs money, which is a great reason to save money.
More and more adults are going back to college or university to gain new skills or increase their earning potential with a new qualification.
Tip: Save the interest on a loan and avoid the debt associated with studying by funding the education yourself.
Make a savings plan so you know how long it will realistically take to get to your target.
7. Car and home repairs
If your car requires urgent repairs or your fridge stops working, do you have the funds available to replace them immediately?
Events such as these are outside of our control but we can make them less stressful by being able to use any saved funds to rectify them and continue our daily lives.
Houses require regular repairs and maintenance that cost money.
There are certain monthly or annual essentials such as getting your boiler serviced and garden maintenance that we can plan for financially.
Saving for regular expenses such as gifts, insurance and taxes will stop you using your emergency funds. Being prepared is a key part of successful saving.
Tip: Use a calendar to make a note of any birthdays that you need to buy a gift for and when your car and house insurance is due.
Add up the total and use it as a goal to save for these expenses before they are due.
Submit regular gas and electricity meter readings to avoid unexpected bills or an increase in your monthly payment.
8. Treating yourself: things to save for
Don’t forget fun things to save for such as little luxuries that you can look forward to such as a holiday or deposit for a new car.
While saving for emergencies is crucial, it doesn’t mean you shouldn’t be treating yourself to things you want as a reward for all your hard work.
Tip: Saving up for a big purchase will also stop you from wasting money on interests and fees from using a credit card or loan.
An exciting goal will also incentivise you to put money away.
9. Investment opportunities
Reasons to save money doesn’t have to be just to pay for things. Investments in businesses or properties give you the opportunity for stronger returns in the future.
Other investment opportunities to consider include:
Speak to a financial advisor who will help you put together an investment plan and decide where to invest your hard-earned savings.
Tip: Set up a separate account and save any spare money you have in it.
You never know when an opportunity may arise that’s too good to turn down.
With the money sat waiting you won’t miss out.
10. Caring for elderly relatives
One of the most personal reasons to save money is to help care for parents or other family members if they get to an age where they need assisted living.
Retirement living costs will vary, however, the average American will spend about $987,000 from retirement age onwards.
Tip: Share your savings plan with any siblings who might also be willing to contribute and take away some of the financial burdens.
Use these reasons to save money now
Saving money is the most important financial habit that you can start doing today.
Saving is not something just for people with lots of disposable income.
Anyone can start saving by creating budgets and reducing living expenses in order to achieve a better financial future.