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The Easiest Way For A 20-Something To Start A Savings Habit

6 August 2008 5 Comments

There are many things to consider and many skills to learn when it comes to the idea of building wealth in your life time. Anyone will tell you that as a 20-something, you are at a huge advantage if you start early. The idea of “starting early” is drilled into your head. What exactly does it mean to “start early”? Should you start picking stocks? Join a 401(k)? I think it’s even simpler. You need to learn how to save. Here is the easiest way to start early.

At my first job out of college, I was just starting to get used to making enough money to support myself entirely. I wasn’t used to collecting a decent sized paycheck twice a month. It was nice. I also didn’t know how to be financially responsible.  Finally someone recommended to me ING Direct, an internet-based high-interest savings account.

Click here to start saving with ING DIRECT!

Why This Changed My Financial Life

1.  I am a 20-something, therefore, I use the internet for everything.  ING is ideal for someone like me.  The online interface and ease of transferring money from my internet savings account to my “brick and mortar” checking account made the experience fantastic.  Also, their customer service is world class.

2.  Once I became a habitual saver, the other parts of my financial life began to fall into place.  The hardest transition is from not saving at all to saving even just a little.  Once you begin to save even $50 a month, you will start to see your priorities change and you will soon be saving more and suddenly more interested in other financial matters such as investing and retirement.

3.  Having a savings account is more impactful on your financial habits than having a 401(k).  I had a 401(k) plan before I had my own savings account.  A savings plan forces you to view your after tax, after all deduction income differently.  It forces you to create “margin” in your life where you don’t spend every dime you earn.  Psychologically, it is very effective and is a necessary starting place for you to build wealth.

My Emergency Fund

A few years later, I still have my ING account.  I love their service and ability to move money in and out of the account with ease, so I stuck with it.  I now use it to hold my “emergency fund”.  This chunk of money sits idle, gains decent interest and is only touched should my family encounter an emergency where we need some quick cash.

Now my savings plan is different.  The money I save goes into investment accounts such as a Roth IRA or my standard brokerage account.  I am no longer accumulating cash into a savings account because I believe I can get a higher return elsewhere.  However, as a starting point for your personal finances, there is no better place for you to focus than on a high interest savings account.  Use it to learn how to save and to build your emergency fund.  Then, broaden your financial picture.


  • Fred @ Smart Savings 101 said:

    I completely agree that everyone needs to open a high interest savings account. I too do my online banking with ING Direct. I like to make a game out of how much money I can save every month. You have to make saving fun.

  • Garret said:

    I recently moved everything in my student savings account over to an HSBC direct savings account. I chose to go through HSBC as they are also who I’m using for my student savings and checking. I was seriously considering going through ING Direct but I wanted to be able to go to my HSBC branch on campus if I ever ran into problems. It can be tough committing your finances to a purely electronic system.

    Keep up the great work on the blog, I just turned 20 a few months ago and have learned a lot from here already!