Only 48% of Millennials Have This Key Money Habit

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Millennials are often portrayed in the media as financially reckless, but the reality is a lot of young workers are making responsible money decisions all the time. Case in point: Millennials on average start saving for retirement at age 24, and 59% have $ 15,000 or more in savings, according to Bank of America’s Better Money Habits – Millennium Report.

But here’s a data point that isn’t as positive: only 48% of millennials invest money in savings on a consistent monthly basis. This means that many young workers are maximizing their wages (or going into debt) and neglecting their savings.

If you are among the 52% of millennials who are not save regularly, then it’s time to rethink that habit – before it comes back to haunt you.

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You need short and long term savings

You need money in a savings account for emergencies, because let’s face it – unexpected bills can happen to anyone. Your emergency fund should contain enough money to cover three to six months of essential living expenses. That way, you can use it to pay for major expenses like home repairs, or use that money if you lose your job and the paycheck that comes with it.

Once you have a fully loaded emergency fund, you should focus on saving for retirement, which means funding an IRA or 401 (k). There are tax breaks you can get by contributing to either account, so it’s worth reviewing your options and seeing which one makes the most sense for you. Generally speaking, it’s a good idea to save on a 401 (k) if your employer offers one, especially if your the company equalizes employee contributions. If so, it means that you are getting free money to fund your account. Otherwise you can open an IRA by most banks or financial institutions.

Ideally, you should aim to put 15% of your income each month into a retirement savings plan to ensure you have enough money to pay your bills when you are older. And if you don’t make a habit of saving that money month after month, you may run out of money once your career is over.

Better save money

If you’re not currently saving money on a monthly basis, a few small changes could be your ticket to increased financial security. First, take a look at your budget, or install one if you don’t already have one in place, and make sure there is room to save. Some people’s budgets allow them to spend their entire salary. If you are one of them, this is a mistake that could leave you strapped for cash in an emergency or when you are older. If your budget does not leave you any room for savings, reduce existing expenseswhether it’s renting a cheaper apartment or spending less on leisure. This way you can cash in the difference.

Once you’ve saved your budget, automate the process to stay on track. If you need to build an emergency fund, make arrangements to transfer a portion of each paycheck to a savings account until you are ready. And once you’re ready to focus on saving for retirement, sign up for your employer’s 401 (k) to have the money automatically deducted from your income. You can also find an IRA with an automatic transfer feature if this is the account you are using for your long term savings.

The fact that 48% of millennials save money each month is encouraging. The fact that 52% do not do so is not. If you are in the latter camp, make changes so that you can join the first one. Your immediate and long-term financial well-being depends on it.


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