A Guide to Saving Money for Millennials
Many Millennials (a group born roughly between 1981 and 1996) grew up in challenging economic circumstances. A lot of this generation has large student loans debts due to the high costs of post-secondary education. Depending on where they live, they may have also had to deal with a rising cost of living, especially in “hot” housing markets where the renting or purchasing a home has becoming increasingly expensive over the last decade or more. In addition, economic prospects for some Millennials have declined due to the Great Recession in the late 2000s, so they may not have the stable, high-paying jobs they thought they would at this point in life. The result is that it can be tough for many Millennials to save money.
However, that doesn’t mean it isn’t possible. Here are some tips for how Millennials can save money.
Know Which Debts to Pay Off First
If you have a lot of debt, it can feel overwhelming. However, paying down debt is more manageable when you have a strategy. Look at all the debt you have and prioritize it. For instance, if you owe money on several credit cards, it’s often a good idea to focus on paying down the one that is costing you the most. This could be the card with the highest interest rate, or the one with the largest balance (and therefore the highest monthly carrying costs). Consider paying the minimum on your other debts and trying to aggressively pay down the most expensive debt first. This will save you money over time.
Try to Reduce Housing Costs
Many Millennials spend a large percentage of their income on housing. If this is your situation, see what you can do to reduce your housing costs. This is especially important if you live in a city or housing market where renting or buying a home is very expensive.
If housing is very expensive where you live, consider renting a smaller apartment or living with a roommate to reduce costs. If you live with someone else, you can split the cost of utilities, maintenance fees, and more. You may also wish to consider moving a bit out of the core to a less expensive location. Though, this could increase your transportation costs, so be sure to take this into account.
Cook at Home
Eating at restaurants and fast food places can be convenient, but it can also be expensive. You can save a lot of money by preparing your meals at home. If you’re busy or don’t think you know how to cook, remember that you don’t need to make elaborate dishes. There are a lot of small and easy meals that anyone can cook at home without much time or effort. Search online and find ones that work for you.
Taking your own lunch with you to work is another great way to save money. Consider using leftovers from dinner to form your lunch for the next day, for instance. This will not only save money and time but it can also help you eat a healthier diet.
Money that you invest in your 20s and 30s has more time to grow, so you’ll have more money for retirement when the time comes. If your work matches funds that you contribute to your RRSP or other retirement saving program, it can be a good idea to contribute so your employer will do the same. If you start saving early, you’ll have to put less money aside each month, freeing up cash for other expenses.
Don’t forget to save for emergencies either. You never know what could come up and, if you don’t have emergency savings, you could wind up in serious debt trouble.
Don’t Compare on Social Media
Millennials grew up with social media. This means they also grew up seeing their friends posting vacation photos and showing off their purchases online. Try to avoid comparing your life to what you see on the internet. Remember that what someone posts online is a “highlight reel” of their life and it doesn’t show the whole story. When you see a post on Instagram or Facebook, you don’t know the details of that person’s finances or how long it they saved to make that big purchase.
In general, who your friends are can affect how much money you spend. If they are spending a lot of money on eating out, buying clothes, and traveling, it’s tough to save without feeling like you’re missing out. To solve this, get together with some friends who are financially conscious and try to come up with strategies to spend less. You can suggest activities that don’t cost a lot of money, such as having a movie night at home instead of going out, taking a hike or playing a sport for entertainment, or having a dinner party rather than going to a restaurant.
How Much You Should Save
Sometimes it’s tough to know if you’re saving enough money. One rule to follow is known as the 50-30-20 rule. This means 50% of your income should go towards needs (housing costs, transportation, clothing for work, etc.), 30% should go towards wants (travel, eating out, entertainment, etc.) and 20% should go towards savings (retirement and emergency savings as well as saving to reach financial goals such as buying a car or a home). This can take some time to work up to, so start slowly and increase your savings every month until you’ve reached your goal. Adding a savings category to your budget and “paying” a certain amount into this category each month can be a very wise idea.