The importance of saving is clear, but do you have a plan to accommodate shifting financial priorities throughout your life? No matter your financial goals, a strategy to adjust your savings goals to accommodate the changes in your life is essential. Professor Pig has some practical tips to help you set realistic savings goals for every age and stage.
Learn the Basics
Children who learn about saving at an early age are more likely to develop financial habits that last a lifetime. Help your kids set up separate SmartyPig accounts for each of their saving goals, like a gaming console or new bike. Whether it comes from an allowance, birthday, or holiday gift, kids should deposit a portion of their money into their savings account. In addition to good financial habits, kids build feelings of pride and accomplishment as they track progress and reach their financial goals.
As teenagers, kids can begin to take on more financial responsibility. Beyond small savings goals like a phone upgrade, hopefully, your teen is looking toward the future and developing a strategy to save for college. In addition to focusing on savings goals, consider helping your teen learn how to watch their spending with a debit card designed for kids. Often with low or no monthly fees, they can give kids the freedom to make financial choices while parents maintain control.
Being a twenty-something and out on your own for the first time is exciting! You’ve got your first job and are learning to budget and pay your own bills. Saving isn’t easy on an entry-level salary, but it’s okay to start small and continue to build good financial habits.
Living expenses are typically the most significant part of any budget. Young adults can find considerable savings by living at home with their parents. Contributing to household bills builds good habits while leaving extra funds to stash away in a SmartyPig savings account dedicated to your first apartment! If you’re already in an apartment, sharing rent and bills with roommates can significantly reduce expenses.
At this stage, saving goals should include building good credit, a cash reserve, and an emergency fund. And it is never too early to start saving for retirement! Even the smallest contributions have plenty of time to grow. Remember to check with your employer for matching too!
In your 30s and 40s, it’s time to get serious about your financial priorities and begin to save more aggressively. Life events like getting married, buying a home, and welcoming a child bring additional responsibilities and expenses, including life insurance, a college fund, and increased retirement contributions.
At this stage, your cash reserve should be more significant. Your emergency fund should cover at least three to six months of regular bills, as well as unexpected expenses such as home or auto repairs or medical bills. You’ll also want to keep your eye on the prize and continue to contribute to your retirement. If you have debt, remember to maintain your savings goals while getting out of debt.
Reap the Rewards
Once you reach your 50s and 60s, you’re putting the finishing touches on your savings goals and financial plan. Your cash reserves should be around ten times your annual income. Max out your retirement and make catch-up contributions if needed. Ideally, you should have enough retirement savings to cover 60-70% of your annual salary, but this can include your income from social security and pensions.
At this stage, you may want to consider downsizing or relocating to ensure your retirement is what you envisioned. You may want to consider a side hustle to bring in extra income. It’s a great way to leverage years of experience and become a consultant or finally pursue your hobby as a job and get paid to do what you love!
Saving is a lifelong process, but you can reach your financial goals for every stage of life with some discipline and a good strategy.