Getting Started With Savings

1 When you’re in your twenties, retirement seems

so abstract, it might as well be thousands of years

away. Maybe it feels something like that to you right

now. Why save for something so many decades in the

future, when every last dollar is accounted for in the

here and now? Saving for anything at all, in fact, may

feel impossible.

2 Getting started early for retirement is smart for

the same reasons you may want to put it off: time is

on your side. If you set aside what you can now, the

magic of compounding numbers — when you begin to

earn interest on interest — can do more of the heavy

lifting over time. In other words, saving early may

result in having to save less over the long run, which

will take some pressure off as you’re juggling other

demands that inevitably arise. Maybe those demands

will be children and all the money they require, or

perhaps you’ll need some time off to care for an aging

parent.

3 And (mostly) nobody wants to work forever —

the earlier you start saving, the sooner you can stop

working and dedicate more time to what’s meaningful

to you. The easiest way to save — for everything, really

— is automating. When you have money automatically

and regularly transferred to its destination, you don’t

have to remember to do anything. That goes for

purely pleasurable financial goals as well, like saving

for a big trip. It’s empowering, and will bring you closer

to the things that make you both happier and more

financially secure. It will take some time and patience

— but your future self will thank you.

4 Before you begin saving, though, make sure

you have a plan to knock out any high-cost debt, like

debt on credit cards, where interest rates (around 22

percent) far exceed the money you might earn when

investing your savings in the stock market over time

(7 to 8 percent).

5 Besides that, get a copy of your pay stub or

check your direct deposit to get a sense of your

take-home pay. (Freelancers should calculate their

average monthly income.) Then write down all of your

expenses — rent, all insurance not already deducted

from your paycheck, utilities, groceries, transportation

costs, car payments, mobile phone, student loans and

any other debts.

6 Moreover, creating a financial cushion — in the

form of an emergency savings fund — can help you

avoid turning to credit cards if you suddenly lose your

job or hit a financial pothole, like covering a $1,000

car repair.

7 Financial planners suggest keeping three to

six months of your expenses in emergency savings

(deposited in a high-yield online savings account,

which offer the best rates). That may seem like a lofty

goal when you’re living on a starting salary that barely

covers your bills. So start small, even if it’s saving $50

a month — $83 a month will get you to $1,000 in a

year — and add more if and when you can afford it.

Set up an automated plan that sweeps that amount

from your checking account to your savings account.

Then, don’t touch that money.

8 Many people with student loan debt often wonder

if they should focus on paying down those loans before

saving for retirement. The short answer: probably not.

But there’s a strong case to be made to both invest

and pay down your loans simultaneously, if you can.

9 Besides retirement, you surely have other savings

goals. Maybe you’re saving for a car, a wedding party

or a special trip. Since these goals have a shorter time

horizon than retirement, or something you’ll need to

access within three years or less, you’ll want to take

less risk with this money. The easiest strategy is to

automatically transfer money into a high-yield online

savings account, say, monthly. With short-term goals,

the amount you save is far more important than your

return.

10 But if you need the money in three to 10 years —

call that a medium-term goal — you may have more

options, depending on how flexible you can be with

your timing. Even if you don’t have large amounts to

save now, setting up the infrastructure to save is the

hardest part — and as your earnings increase, it will

be much easier to save and invest more.

BERNARD, T. S. Getting started with savings. The New York Times. Your money, May 17, 2024. Available at: https://www. nytimes.com/2024/05/17/your-money/saving-money.html. Retrieved on: July 12, 2024. Adapted.

Getting Started With Savings

1 When you’re in your twenties, retirement seems

so abstract, it might as well be thousands of years

away. Maybe it feels something like that to you right

now. Why save for something so many decades in the

future, when every last dollar is accounted for in the

here and now? Saving for anything at all, in fact, may

feel impossible.

2 Getting started early for retirement is smart for

the same reasons you may want to put it off: time is

on your side. If you set aside what you can now, the

magic of compounding numbers — when you begin to

earn interest on interest — can do more of the heavy

lifting over time. In other words, saving early may

result in having to save less over the long run, which

will take some pressure off as you’re juggling other

demands that inevitably arise. Maybe those demands

will be children and all the money they require, or

perhaps you’ll need some time off to care for an aging

parent.

3 And (mostly) nobody wants to work forever —

the earlier you start saving, the sooner you can stop

working and dedicate more time to what’s meaningful

to you. The easiest way to save — for everything, really

— is automating. When you have money automatically

and regularly transferred to its destination, you don’t

have to remember to do anything. That goes for

purely pleasurable financial goals as well, like saving

for a big trip. It’s empowering, and will bring you closer

to the things that make you both happier and more

financially secure. It will take some time and patience

— but your future self will thank you.

4 Before you begin saving, though, make sure

you have a plan to knock out any high-cost debt, like

debt on credit cards, where interest rates (around 22

percent) far exceed the money you might earn when

investing your savings in the stock market over time

(7 to 8 percent).

5 Besides that, get a copy of your pay stub or

check your direct deposit to get a sense of your

take-home pay. (Freelancers should calculate their

average monthly income.) Then write down all of your

expenses — rent, all insurance not already deducted

from your paycheck, utilities, groceries, transportation

costs, car payments, mobile phone, student loans and

any other debts.

6 Moreover, creating a financial cushion — in the

form of an emergency savings fund — can help you

avoid turning to credit cards if you suddenly lose your

job or hit a financial pothole, like covering a $1,000

car repair.

7 Financial planners suggest keeping three to

six months of your expenses in emergency savings

(deposited in a high-yield online savings account,

which offer the best rates). That may seem like a lofty

goal when you’re living on a starting salary that barely

covers your bills. So start small, even if it’s saving $50

a month — $83 a month will get you to $1,000 in a

year — and add more if and when you can afford it.

Set up an automated plan that sweeps that amount

from your checking account to your savings account.

Then, don’t touch that money.

8 Many people with student loan debt often wonder

if they should focus on paying down those loans before

saving for retirement. The short answer: probably not.

But there’s a strong case to be made to both invest

and pay down your loans simultaneously, if you can.

9 Besides retirement, you surely have other savings

goals. Maybe you’re saving for a car, a wedding party

or a special trip. Since these goals have a shorter time

horizon than retirement, or something you’ll need to

access within three years or less, you’ll want to take

less risk with this money. The easiest strategy is to

automatically transfer money into a high-yield online

savings account, say, monthly. With short-term goals,

the amount you save is far more important than your

return.

10 But if you need the money in three to 10 years —

call that a medium-term goal — you may have more

options, depending on how flexible you can be with

your timing. Even if you don’t have large amounts to

save now, setting up the infrastructure to save is the

hardest part — and as your earnings increase, it will

be much easier to save and invest more.

BERNARD, T. S. Getting started with savings. The New York Times. Your money, May 17, 2024. Available at: https://www. nytimes.com/2024/05/17/your-money/saving-money.html. Retrieved on: July 12, 2024. Adapted.