By Destinee Whittington, Mayor Marion Barry Summer Youth Employment Program
Saving money is usually not the first thing on a young person’s mind. Many young people enjoy the freedom of having no financial responsibility, so they spend money without thinking twice. As a young person, I’ve been told to save money but no one has ever taught me why it’s important to save. Here’s why saving money as a young adult is important.
Having a financial safety net is essential in life, even as a young person. A safety net, similar to an emergency fund, is money that you set aside for unexpected expenses. If it helps, you can consider your safety net your regular savings account that you can access if you have a responsibility, but you’re short on cash.
For example, if you are planning to go to the movies with your friends on Saturday, but you just found out your senior dues are $500 having a safety net will be helpful. That safety net would allow you to spend time with your friends without having to figure out where to find that extra money The money that you have been setting aside has provided you with a safety net, so you don’t have to worry about your dues because you have already saved ahead. Your safety net can be in the form of a savings account separate from an emergency fund. Having a safety net does not always have to be for pop up expenses. It can also be used for that special date you’ve been planning or that awesome summer vacation to Miami with your family.
When you’re hit with an emergency, the last thing you want to worry about is how you’re going to pay for it. When you already have an emergency fund set aside, you have one less thing to worry about during a stressful situation. Emergencies and the cost associated with them are unpredictable, so you should try to save at least $500 in your rainy day fund. Your emergency savings fund can help you avoid using credit or borrowing money from others. Let’s say you decide not to work next semester so you can focus on academics, but you’re hit with an emergency. One day you get a flat tire on the way to class. How will you pay for it?
This would be the perfect time to use some of the money in your emergency fund. The money you have saved up can now allow you to afford a new tire. You will feel better knowing that you can afford to pay for your emergency without being stressed to find the finances to cover it. The good news is saving for emergencies doesn’t have to be expensive. You can set aside five to 10 dollars each time you receive money, whether from a paycheck or monetary gift. That way, you can steadily build your emergency fund.
When you have savings, you can borrow money from yourself instead of using a credit card. Credit cards aren’t bad, but it’s easy to get carried away and misuse your card.
Credit cards give you the freedom to buy now and pay back later. When you’re just beginning to use credit, it’s really important to read the fine print on your credit card contracts. Failing to do so could lead you into a financial hole with tons of debt and added interest. Overspending on your credit card and missing payments could also cause you to damage your credit score. When you decide to use cash or your debit card, you are preventing yourself from using credit and owing money later.
For example, using credit to purchase $200 shoes may not be a good investment, but purchasing a $200 bike with credit can be. You can use your bike to lower your transportation costs. You can even use your bike to pick up a side gig, like delivering food or newspapers.
Saving money is very beneficial. A good start for young people is saving money for a safety net, emergency fund, and to avoid using credit. Creating a savings goal will help you keep track of your money and allow you to have full financial confidence. Start saving today!
Let America Saves help you save money. It all starts when you make a commitment to yourself to save. Take the first step today and take the America Saves pledge to save money, reduce debt, and build wealth over time. And it doesn't stop there. America Saves will keep you motivated with information, advice, tips, and reminders to help you reach your goal. Think of us as your own personal support system.
Check out these great savings tips for young people from @AmericaSaves! https://bit.ly/2LeaR9Y