How to Save Money When You're Young

How to Save Money When You're Young and Broke

by Cole Kelly // School Teacher & Financial Advisor

SAVINGS

Venturing Into Financial Literacy

Listen up all you Gen Z and Millennial finance apprentices, this one’s for you. As a younger person, you may be less knowledgeable on how to use money to your advantage. Luckily, it’s very easy to start thinking and planning smarter. Perhaps you’ve started a new job and want to stash some away some cash for your first investment, or maybe you’re completely lost when it comes to savings and checking accounts and need to start from square one.

When it comes down to it, financial literacy is simply understanding how to make smart decisions when it comes to your money.

Pretty simple right? So stop biting your nails and tell those butterflies in your stomach to settle. Money doesn’t have to be intimidating. In fact, it’s not only possible to save money while you’re young, but it’s actually one of the best times to do so. While you may not make as much money as you will years from now, you also don’t have as many financial responsibilities at this time – bills for things like insurance, a mortgage, car payments, and utilities. This makes for the perfect time to kick off your journey to financial independence – and it all starts with forming good habits around saving money.

To help you get started, we broke down some of the best pro-tips from Financial Adviser and School Teacher Cole Kelly, from his album How to Save Money When You’re Young and Broke in the Penny app.

Tip #1: Pay yourself first and make saving money a priority.

First things first, you must prioritize saving your money. This simply means putting your money toward savings first when you get your paycheck, then using the rest for living expenses. If you wait to pay yourself until after your bills and expenses are taken care of, you risk not being able to hit your big picture financial goals or even forgetting to transfer that money at all. Take a good look at what you can afford to transfer into savings per month and start simple! It may look like $10 per month at first, but as you get better at meeting that goal it too will grow.

Tip #2: Master delayed gratification to overcome bad spending habits.

Many young people are stuck operating under the instant gratification complex. We see that matte black two-seater fresh out of college, and think “I’ve worked hard, I deserve something nice!” Nowadays we’re used to having things faster, newer, and more easily accessible than ever before. But when it comes to saving, it’s important to reframe the way you think about spending your money and play the long game instead. This means investing in your future by saving money and making smarter decisions for long-term financial security. Instead of buying that two-seater and making payments right out of college- chug around in your starter car a few more years. Five years down the road, you could have saved enough to put CASH down on that dream car and avoid the paying all that nasty interest. When it comes to budgeting, this too will set you up for success.

Tip #3: Set savings goals and revamp your budget.

You may be at a stage in your life where you can afford to have some flexibility in what you’re financially responsible for. This is a great jumping off point for setting manageable goals and organizing a less complicated budget. Start by setting goals based around your lifestyle, needs, and future plans. This can be as simple as:

“I want to put $50 away from every paycheck into my savings,” OR
“I want to cut back on eating out, to once a week.”

Once you’ve set those goals, find a great budgeting tool that can help you organize and manage your money. Apps like Mint, Acorns, or Stash can help you set budgets and stick to them. This is an easy way to see how you’re doing and get more familiar with your finances.

Tip #4: Visualize your budget.

Make sure to visually compartmentalize your different savings categories. For example, you may use different bank accounts, or checking/savings accounts within your bank for different financial goals you have. For example, you may have a savings account for investment, one for emergencies, and another for your dream car.

Having designated folders on your phone where you keep your finance and banking apps is another great way to keep yourself organized.

Tip #5: Get a side hustle, make some extra income.

All of the great financial gurus out there will tell you – a good side hustle never hurt nobody. Most financial advisors will recommend multiple streams of income to give you more financial freedom in your savings journey. You have to be creative and think outside the box when looking for different ways to make money. And there are tons of opportunities out there! Trust us. Flipping used furniture, walking dogs, or even delivering food on Doordash are some of the many side hustles out there waiting for you to take advantage of them. You’ll may experience some failure before you find a winning side hustle, but failure isn’t anything to be afraid of. Get out there, take those risks, and always look for opportunities to invest in yourself and grow your saving capacity.

Tip #6: Start a savings account.

If you haven’t already, start a savings account now! Even if you can only put in a few dollars each month, it adds up over time and it’s worth it. Savings accounts are a great place to keep your money because as the money sits in your account, it will earn interest and keep on growing for as long as you leave it there. Start with a few bucks, continue adding, be patient, and watch your money grow over time. It may be tempting to take money out of savings when you’re strapped for cash. When COVID hit, many people have been forced to dip into their savings to keep their heads above water and pay their bills. To get ahead of this risk, create an emergency fund to protect you during hard times. The experts recommend setting aside about 3-6 months of monthly income for your emergency fund.

Allocating different money, into different places, for different reasons, is the key to saving money intelligently.

Tip #7: Develop the habit and live your best life.

Understanding the time value of money will be your best asset in your savings journey. As you work towards your savings goal remember to be patient with yourself – you’re learning as you go, and everyone has to start somewhere!

For more great savings tips, head to the Savings category in the Penny App for albums like The Best Savings Accounts of 2020 and Tips for Avoiding Insane Tuition Fees.

It’s important to start your financial journey early because the earlier you start, the easier it’ll be to accomplish your goals. You’ll be happy you did.