Saving While Young: Common Pitfalls
Young workers have a tremendous opportunity to begin to prepare for a great future. While many do not think about their middle age years and retirement age, those who begin to prepare for the future while they are still young can gain an advantage on their peers. People in their 20s, however, often make mistakes that can hurt their future finances.
Here are some pitfalls to avoid:
Small expenses add up
The small expenses that young people often use their money for quickly add up over time. A classic example is eating at restaurants. While the cost of a single meal is generally fairly low, going out several times per month quickly adds up. Young people often complain about having to spend money on affordable auto insurance plans while spending even more dining out during the week. Restricting one’s trips to restaurants can lead to significant savings over the years. Learning to cook is a fun, money-saving skill.
It is never too early to start planning for retirement
People in their 20s rarely think about their retirements. Retirement seems so far away, and there is plenty of time to start saving. Some simple calculations, however, show how much money adds up over time; those who begin to save early can finance much better retirements than those who wait.
Cheaper is not always better
Many in their 20s think that saving money always involves buying the cheapest products and services that they can find. Over the long-term, however, more expensive options sometimes end up saving money. A washing machine that will last for 30 years, for example, will eventually be cheaper than one that breaks down every ten years. Further, ongoing maintenance fees can significantly increase the cost of a particular purchase. Quality is sometimes worth the expense.
Exercise saves money in several ways
Exercising leads to being healthier, and healthier people spend far less on health-related expenses. By exercising regularly, young people can reduce their future medical expenses significantly. Additional, many forms of exercise are also cheap entertainment options. A game of basketball with friends, for example, costs far less than a trip to the movie theater.
Those in their twenties are expected to have fun
These days, people in their twenties are still considered young adults, and people are not expected to fully grow up until they are into their thirties. A few financial habits and some self-restraint, however, can put young adults into a much better financial situation in the years to come.