Gen Z adults aren’t saving their money.
Only 15% of Gen Z regularly puts a portion of their paycheck into a savings account, according to a recent Bank of America survey. And just 1 in 5 Gen Zers are contributing to a retirement account.
The survey gathered 1,097 responses from adults 18 and older and an overlapping sample of 1,091 adults between the ages of 18 and 27. Gen Z is typically defined as those born between the years of 1997 and 2012.
The good news: Gen Zers are still under 30, and have plenty of time to save money and develop smart financial habits.
But it’s not an overnight process, says Douglas Boneparth, a certified financial planner and founder of Bone Fide Wealth. He urges young adults to ignore any pressure from social media or people around them and do what’s best for their life.
“Everyone’s financial situation is different,” he says. “If you focus on yourself and work on what you can control, you’re going to be better off for it. Saving is great, but the discipline around how you manage your money is far better.”
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In fact, Gen Z’s youth is even more reason to start now, says Winnie Sun, a CFP and co-founder of Sun Group Wealth Partners.
“When you’re younger, there’s two ways of building wealth,” Sun says. “I always say, either you already have wealth, then you just get wealthier, and that’s great. Or the second is, you’ve got a lot of time. And for a Gen Zer, you definitely have a lot of time. Even if you save and invest small bits now, it’s going to contribute and compound to a very significant amount of savings in the future.”
Here are three steps to get started building up both your short-term and long-term savings.
1. Manage your monthly earnings
There’s not necessarily a one-size-fits-all approach to saving, but you can start thinking about becoming financially disciplined by monitoring the cost of your expenses and the money you have left over.
Say you’re left with $500 after covering all your expenses for the month. Think about how to manage that money, rather than spend it, Boneparth says. It’s not a complicated practice, but it helps train your brain to take a step back and think about your goals and future.
If you have a good week, you may be tempted to treat yourself to some impulse shopping. But it’s a good idea to pause and consider how that would impact the financial goals you’ve set for yourself, he says.
If you work better with percentages, a common method of dividing your earnings is to put 50% toward your necessities, 30% toward discretionary costs and have 20% devoted to your savings, Sun says. But if you’re in your 20s, she suggests adjusting those percentages to set aside 25% for savings, at least for 10 years.
2. Save enough for a rainy day (or a few)
Even if you haven’t built up that financial discipline yet, you should at least be saving for any number of worst-case scenarios, like losing your job. That might look like setting enough aside to cover three to six months of your living expenses, Boneparth says.
A more ambitious goal might be six to nine months worth of expenses, but either way, be thinking about what you might need to survive if your cash flow is disrupted, he says.
For example, if you bring in $5,000 a month and your expenses cost $4,000, you’ll typically have $1,000 a month you’re able to save. It’s a good idea to start thinking about where you want to place that money and what purpose those savings might serve, says Boneparth.
3. Evaluate your goals
Once you’ve saved enough to live comfortably for at least three months, it’s time to set some goals, such as paying off student loan debt, buying a home or saving for retirement.
From there, Boneparth recommends considering the following three aspects of your financial future:
- How much will your financial goals cost, and how much time will they take to achieve?
- When do you want to achieve each goal?
- Which goals do you want to prioritize?
Your priorities help “determine which goals are going to get funded ahead of, or greater than, other goals,” Boneparth says.
By considering those three factors, you can start to make an effective savings plan that works for your lifestyle and the future you envision for yourself.
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