Gen Z adults aren’t saving money.
A recent Bank of America survey found that only 15% of Gen Zers regularly put a portion of their pay into a savings account, and only one in five Gen Zers is contributing to a retirement account.
The survey collected responses from 1,097 adults ages 18 and over, plus an overlapping sample of 1,091 adults between the ages of 18 and 27. Gen Z is typically defined as those born between 1997 and 2012.
The good news is that Gen Zers are still under 30, so they have plenty of time to save money and develop smart financial habits.
But it’s not an overnight process, says Douglas Bornparth, a certified financial planner and founder of Bornfied Wealth, who urges young people to ignore social media and the pressure from those around them and do what’s best for their own lives.
“Everyone’s financial situation is different,” he says. “The more you focus on yourself and the things you can control, the better your results will be. Saving money is great, but being disciplined in how you manage your money is much better.”
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In fact, Gen Z’s youth is all the more reason to get started now, says Winnie Sun, CFP and co-founder of Sun Group Wealth Partners.
“When you’re young, there are two ways to build wealth,” Sun says. “I always say, if you already have wealth, you just need to get wealthier, that’s great. The other way is, you have a lot of time. And Gen Z definitely has a lot of time. Even if you save and invest a little bit now, it will add up to a very large amount of savings in the future.”
Here are three steps to help you get started on both short-term and long-term savings.
1. Manage your monthly income
While no one-size-fits-all savings method is perfect, keeping track of how much you spend and what you have left can help you start thinking about being financially disciplined.
For example, let’s say you have $500 left over after paying all your expenses this month: Instead of spending it, think about how to manage it, says Bornparth. It’s not a complicated exercise, but it helps train your brain to take a step back and think about your goals and future.
If you’re having a good week, it might be tempting to make an impulse buy, but it’s a good idea to pause and think about how it will affect the financial goals you’ve set for yourself, he says.
If you like to think in percentages, a common way to split your income is to set aside 50% for necessities, 30% for discretionary spending, and 20% for savings, says Sun, but if you’re in your 20s, Sun recommends adjusting those percentages to save 25% for at least 10 years.
2. Save enough money for a rainy day (or days)
Even if you’re not yet capable of managing your money like that, you should at least start saving for the worst-case scenario, like losing your job. That might mean saving enough money to cover three to six months of living expenses, says Bornparth.
A more ambitious goal might be six to nine months’ worth of expenses, but either way, you should think about what you’ll need to survive if your cash flow is cut off, he says.
For example, if your monthly income is $5,000 and your expenses are $4,000, you can usually save $1,000 a month. Start thinking about where you want to spend that money and what you want to spend those savings on, says Bornparth.
3. Evaluate your goals
Once you have saved enough money to live comfortably for at least three months, set goals like paying off student loans, buying a home, or saving for retirement.
From there, Borneparth recommends considering three aspects of your financial future:
How much will your financial goals cost and how long will they take to achieve? When do you want to achieve each goal? Which goals do you want to prioritize?
Prioritization helps “determine which goals get funded before or with more funding than others,” Bornparth said.
By considering these three factors, you can begin to create an effective savings plan that fits your lifestyle and the future you envision.
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