Start saving while you are young
A lot happens in your 20s – you go from being dependent on your family to setting out into the unknown world of adulthood. It’s an exciting decade where decisions that you make will have long-term consequences on your future.
That might sound terrifying, but it can also be rewarding. These are the years where you start to build your career, start earning and perhaps move out of your parents’ home. If you are struggling to makes ends meet, saving might be the last thing on your mind. However, here’s why it should be a priority.
- You need time for your money to grow
Compound interest might sound like a term used only by wealthy people, but it’s simple to understand. Compound interest is “interest earned on interest” – it’s money you get from not spending interest you’ve earned. Simply put, your money earns more money if you leave it where it is, rather than spending it as you earn it. In your 20s, time is on your side. If you start saving money early, your money has a longer time to earn interest and grow, setting yourself up for a stress-free retirement.
- You’re prepared for life’s unexpected expenses
Along with adulting comes the real possibility that things might not go smoothly all the time. One of the best things you can do in your 20s is to save for an emergency fund that is only for use in unexpected situations where you need money, and you need it fast – for example, if you get hurt and need medical care, or you lose your job and have to survive while searching for another one. If you have an emergency fund in place, you won’t have to take out a loan to cover the twists and turns life throws at you.
- Get a foot up on the property ladder when the time comes
Buying property these days may seem like an impossible dream, but not if you started saving in your early 20s. With a good amount of savings built up, you may be able to pay a large deposit and have smaller monthly repayments by the time you are ready to buy a house.
- You can earn a good credit score
Unpaid debit orders and bills will cause you to get a bad credit score, which will affect your ability to buy that house or new car you’ve been saving for. However, if you have money in your savings account, it’s a way to make sure you always have cash to pay on time and unexpected expenses won’t affect your credit score.
- A good habit to last a lifetime
It’s so easy to reach the end of the month and wonder where your money went. Whether it’s eating out, buying new things or going on a weekend getaway, it’s never a good feeling to have nothing to show for your hard work. If you commit to saving money in your 20s, you’ll be financially independent sooner. Don’t waste any time!
The information contained in this article is for information purposes only and does not constitute professional advice.
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