5 Savings Goals to Reach in Your 20s
When you are in your 20s, you are establishing the habits that will follow you throughout your life. This is especially true of your finances. If you practice good financial habits in your 20s, you will be in a much better place financially as you continue forward. In your 20s, you establish your career, and prepare to start your family. You likely will move and start working in a different place than where you attended college.
As you start working, you may set savings goals for yourself. These are five savings goals that you should reach while you are in your 20s.
Build an Emergency Fund
One of the first things you should be saving for is an emergency fund. An emergency fund makes it easier to manage your money and stick to your budget. You can use your emergency fund to cover unexpected expenses or to help you out if you were to lose your job. When you first start budgeting, you may start out with a smaller emergency fund of $1000. You can build this up to cover one month of income, and then work on getting out of debt. Once you have done that you should save between six months to one year of expenses. The amount you save will be determined by the stability of your job, and whether or not you are a household with just one income. Your emergency fund should be fairly easy to access.
Save Up a Down Payment for Your Home
Another goal you should work on in your 20s is saving up a down payment for your home.
This does not mean that you need to purchase your first home in your 20s. Depending on your job stability and whether or not you want to stay in the city where you are currently working you may not want to buy your first home. The down payment will make it easy to take that step when the time is right.
A good down payment is 20 percent of the purchase price of your home. The larger the down payment the nicer the home that you can buy. If you start saving early, you will be in a better position to buy a house when you are ready.
Start Contributing 15 Percent to Retirement Each Month
The key to having enough money for retirement is to start saving early and then continue saving regularly until you retire. When you get your first job, you should start saving for retirement. You may start by contributing up to your employer’s match until you are out of debt. Once you do that you can begin increasing the amount that you contribute to retirement until you reach 15 percent. This can be done each time you get a raise, you raise your contribution by that amount, or you choose to increase it by one or two percent each year.
Start Investing Money Regularly
If you want to build wealth, you need to think beyond saving money and begin to invest it. Try to reach that point before you are 30 years old. You can choose to invest through a financial adviser who can recommend investment types and help you build an investment portfolio. If you understand the stock market, you may opt to invest yourself through an online brokerage firm.
The key to investing is to diversify across different companies and different types of stocks. It is important to understand the risks associated with each type of investment, and to move to more conservative investments as you get older.
Establish a Habit of Saving Money
Another key habit to establish when you are in your 20s is the habit of saving money. This means that you are always looking for the most affordable option. You shop at the most affordable grocery stores, take advantage of coupons and wait for items to go on sale. If you can look for ways to reduce your daily expenses, you will have more money to apply to your savings and investing goals. It will also prevent you from running up excessive amounts of debt. This is really embracing a frugal lifestyle with the understanding that this will open doors and allow you to spend more on the things that are the most important to you.