Extreme Saving When You Are Young: How Much Is Too Much?

Is it possible to save too much money, particularly when you are young? After all, aren’t these the years when you should be filling your time with life experiences that you will never have the opportunity to repeat? There’s college, and trips with friends and the freedom from an 8-5 grind that you’ll never get to experience again. However, your 20s are also an excellent time to lay a foundation for wealth building that can give you a great head-start on financial freedom.

I recently received an email from a concerned Frugal Dad reader we’ll call “Brian.” Here’s the relevant portion of his message to me:

I’m 22, employed, making “OK,” but not “great” money, live at home but have several monthly expenses beyond the standard cost of living. I’ve managed to save $26,000 over the last year and a half after paying off almost $6k in credit card debt. I’m currently in the process of attempting to save $750-1,000/month.

Being tight with my money in order to meet my savings goals sounds like sound advice on the surface, but im begining to question if all this attention to saving is worth the heache. I’ve spent the last hour going over my finances to try to justify the additional monthly cost of the new iPhone…and while I clearly “could” afford it, I’m finding my lust for saving money to be much stronger than my attraction to the iPhone.

So my question is. How can I enjoy these years of financial freedom guilt free while saving for my future?

Well Brian, you’ve certainly impressed me with your savings intensity. It’s hard for an old frugal dad like me to find fault with your plan, but because you took the time to put what you’re feeing into words, I suspect you are slightly resenting your financial plan.

When I was your age, I was on a fairly similar path. I married young (when I was 20), and instantly wanted to learn, and do, everyone “grown ups” did with their money. I began learning about Roth IRAs and 401(k)s and starting dabbling with single stock investing. I was a savings madman.

Sensing my over-exhuberance for all things finance, my grandfather wrote me a letter on my 20th birthday, and one line in particular really stood out. He told me to slow down, enjoy life, to stop and smell the roses. Life is meant to be enjoyed. It had a profound effect on me because I realized then that even smart things done to a point of obssessing over them didn’t make them any smarter. In fact, it hurt you in the long run.

So, while I salute your ability to pay down debts, and save $26,000 at such a young age, I would also advise you to live a little. If you want that iPhone, can afford to pay cash, have researched and thought long and hard about the purchase, and still decided you want it – then I say go for it! By allowing yourself a few rewards you will be less likely to grow resentful of your plan.

On the other hand, your penchant for saving money and living frugal may mean that you decide a new cell phone will do, or a cheaper version BlackBerry may meet your needs. Think more in terms of what the device will cost each month to operate rather than the initial cash outlay, because it is those monthly bills that will get you in the long-run.

One word of caution. It’s a slippery slope. Today’s iPhone might be a new entertainment system tomorrow, and then a new car, and then a bigger house, etc. You see where I’m headed. Continue to approach things from a frugal perspective, separating true needs from true wants, only occasionally allowing yourself some of those wants.

I fully expect you to be a millionaire one day because you have such a great foundation. Keep up the great work!


  1. It might make him feel better about purchases if he set it up as a reward system. Like for every $5,000 he saves, he gets 10%, $500, to reward himself. Or if that’s too much, he could do it on a larger scale, like plan for an Iphone as a reward for saving over 25k.

    You have to build in some fun money or Present Brian may end up resenting Future Brian, and no one wants the tear in the space-time continuum that could create 🙂

  2. Before you live it up or pile into your 401k at a young age. Consider just trying to live within your means.

    That means paying off debts before saving for your distant retirement. Sometimes a little money in a 401k at a young age gives people a false sense of security resulting in even more debts.

  3. When I was his age I had a daughter and a son on the way (planned). If I had been smart I would have worked harder at saving instead of spending everything I made. I felt at that age that I had “forever” to save money for retirement…HA! Now I am almost 45 and am having to work harder to save that nest egg!

  4. I wish I’d been more like Brian at the age of 22. 🙂

    I understand how he feels about not wanting to take money out of his hard-earned savings. The more I save, the more reluctant I am to take that money out for any reason.

    Establishing more than one savings account might help… If Brian sets up a savings fund for things like new gadgets, travel, etc., he won’t have to feel guilty about using that money.

  5. @Susanne

    My wife and I have followed a similar plan. We have accounts for emergency fund, house repairs and misc non-monthly expenses, travel, kid fund (looking at best college savings options now), and fun money for each of us. It has served us quite well.

  6. Does Brian live at home with his parents? If so does he pay rent? It would be easy for me to save if I lived with my parents as well. If so maybe he should look into iusing that $26,000 to buy a house or rent a cheap place and keep saving.

    That being said we all need to splurge from time to time. We all need a little spending money in our budget’s. But set a budget for spending every month and stick to it, so you can enjoy a life that is paid for with cash!

  7. I was just going to leave the same advice I see Susanne just left! Maybe by creating some kind of fun money or “blow” part of the budget- a category that is accountable to nobody- this could help ease the guilt. By putting $50/mth in there, he could spent it on things he views as non-necessities.

    Great job saving, Brian! You know you’ve managed to make many of us envious of you, right?? 🙂

  8. If you’re stressing about saving too much, it sounds like your money balance is a little out of whack. Spend a little bit on something you want and see how that affects you emotionally. If you regret it, it’s not thousands of dollars you’ve lost, it’s just an iPhone – you’re young enough to recover.

  9. Everything should have balance and moderation. Seems like he has no balance. Splurge a little, being a tightwad is not a goal. You may find yourself with a lot of money and alone.

  10. Saving while young is a great idea. I saved like crazy when I was young but got wiped out by circumstances I did not cause but should probably have been able to predict. I recommend it to everyone (well, maybe not the getting wiped out part, which is not fun). It’s far easier to rebuild if you have to start before age 25.

  11. I’m 25. My household saves a lot (probably 25-30% of our income).

    I HIGHLY recommend continuing to save a TON while you can. We have a very clear goal: I want to buy a house (or condo) free and clear in about 10 years – no mortgage. I realize this is a lofty goal, but we’ll get there. In the meantime, we still get a kick out of things like expensive coffee beans and hot water on a daily basis (of course, it helps that we were dirt poor for a year starting out and appreciate these things immensely now).

    Congratulations on such a good start! Good luck!

  12. I’m only 19 and am pushing a $20k net worth. I recently got my associate’s degree and am expecting a $16k bonus later this year. I participate in my employer’s 401(k) plan, putting in 20% every month, and my IRA should be maxed out within a few months. Does anyone have any advice for me?

  13. Sound advice. Rather than an iphone (though who am I to say what people should want to spend their money on?), which I think is going to cost about the same at any point in life (i.e. today’s 20-year old and today’s 50-year old are paying the same for the iphone), I’d say that it’s likely (not certain) that many 20-somethings can enjoying doing some sorts of activities (and perhaps buying some sorts of stuff) much, much cheaper now than will be possible later in life. For me the big “splurge” at that age was travel, and I reasoned that it was cheaper to take the same trips (in terms of content) then than it would be when I was older. Boy was I right about that! If you’re young and not overly tied down by dependents, a spouse, a mortgage, a job (not saying that you cannot have any of these things, but their effects are multiplicative, so having more than one adds up), you can travel so, so, so much cheaper than I (wife, mom, homeowner, dog owner, full-time job, dad with Alzheimer’s) can now.

    Plus it actually really is cheaper for 20-somethings to travel in some regards, e.g. discount youth rail passes in Europe.

    But I’m not talking about inflation, or even really about age — mostly about life stage. Think about where you are now and what you can (and want to do) that will be more expensive for logistical reasons when you’re older, would be my advice (the iphone isn’t it! Though if it’s really an iphone you want, ignore me and go get it…).

  14. Excellent article. Especially like the line “even smart things done to a point of obsessing over them don’t make them any smarter.”

    I think Brian’s right to save so much while still living at home. I also think it’s good to buy the iPhone he’s researched so that, as you say, he won’t resent his hard savings plan. But I would definitely use his unprecedented, rare situation to leverage it and get as ahead financially as he can. He’ll never again be able to save the way he’s able to save now.

  15. So you’re wondering whether you have gone too far in your anti-splurging? When I started saving like crazy I went for one year without buying more than a couple of books (this from a guy who was used to buying a couple of books per week), and that was too much seeing that I liked books and I didn’t have access to a library. What I’d recommend is to see if you can find something else that is as fascinating as the iphone, but costs less (for me, I started a website and read things on the web instead). That way you’re not messing with your equally strong desire to save (I presume you’re saving for a purpose rather than just hoarding money). If you keep going for a handful more years, you will become financially independent. I became FI when I was 30 and retired three years later and I tell you it is all worth it. If I had kept going until I was 40 I would have been a millionaire, but I gave that up for 10 more years of freedom. I would specifically recommend looking into buying investments. That can be as exciting as buying iphones, so instead of buying an iphone, why not buy some apple shares and have the pod-people pay you instead of the other way around.

  16. I wish I was like this now. I am 22 and, while I still feel ahead of the curve financially compared to many of my peers, I’m not feeling in the same league as “Brian”.
    When I get married in a few months, I expect this to be a big difficulty. Budgeting for ‘fun money’ flies in the face of my typical way of thinking, but still something that is occasionally necessary just to not go INSANE.

  17. I’m glad I ran across this post. My wife and I have been grappling with this very question. We feel as if we are saving too much and not allowing ourselves to enjoy life more. I know what Brian is going through, because I use to be Brian. I graduated college and got out on my own and landed a decent job at 23. My number one priority was taking care of my finances. It’s not to say that I didn’t make some bad choices, but I always had a great savings rate, 20% or more of my income. It was nothing to put back $1,000/month in those early years. I thought, by the time I get married, and we have two incomes, my wife and I can really start living because how much can you really save, right?

    Well, I’m 31 now, and my wife just turned 30 and we still save like mad. That $1,000/month has become $3,000 to $4,000/month. And the sad part about it is we feel like we still aren’t saving enough! It’s tough to break that cycle because when you do go all out and save for a long time, it’s hard to give yourself permission to spend because you feel guilty.

    I in particular have been doing a lot of soul searching of late because of some health issues in my family, and more and more I am realizing that, preparing for your future is good. But not at the expense of not enjoying life now. We are not promised tomorrow.

    Wouldn’t it be sad to be that guy who is 65, ready to retire with millions in the bank, because financially he and his wife did it by the book and saved and were finally ready to enjoy life. The only thing is, they never planned that she wouldn’t be around at retirement to enjoy it, and all he did was sit on the front porch and regret all the things they didn’t do while she was alive? I don’t want to be that guy.

    I guess what I’m trying to say is that you have to have balance. It is so important. Everyone should do what they need to ensure a good future, by saving enough. But don’t save everything, and put off life experiences that may be more rewarding than a pile of money.

    In my earlier scenario, I would rather be sitting on my front porch when I’m old and have my memories and experiences with me, and enough money to live out a comfortable life, than to be sitting on that porch regretting not living a fuller life and having enough money in the bank to live like a king ten times over.

  18. I’m in a similar situation as Brian.

    I’m 20 and at the moment, I automatically save 30% of my income, however, except for some monthly fixed expenses, almost everything of that is left.

    I often tell myself that saving 30% is enough and that I should just try to enjoy myself with the rest of the money, but for some reason, I never really spend any of it.

    O well, slowly , I’m beginning to learn to see things more in their perspective and learning to allow myself to spend a bit more!

  19. Give yourself an allowence every month, for fun stuff like going out to eat, buying clothes, etc.

    Make some financial goals… How much do you want to save? What are you saving for?

    Figure out how much you need to save for retirement based on your age and projected living future living expenses. This way you can know how much you need to start saving for retirement now.

    Live you life, have fun, and don’t deprive yourself of things you want (keeping your goals in mind). Relationsihps are more important than mondy, so don’t blow your friends off because you don’t want to spend the money.

  20. @Emily: I just read through my post wondering what you were referring to, until it occurred to me you might be referring to your own comment…LOL! No worries; we keep things very informal here. If we were out to criticize grammar and weird sentences I’d have to quit writing!

  21. Too Brian – I am frugal person ( thought not as much as you) and I truly do love my iPhone. I use it all the time. It is a regular time saver and sometimes cost saver with all the apps and features.

    Other notes: a bit cheaper, but equally nice phone is the g1. My husband has this and I would recomend it as well. Research it too, and then choose what is right for you.

  22. I too am a rabid saver (about 30% of my net income plus 15% to my 401K). But I save because I love to do it. It gives me a sense of personal accomplishment and total freedom from financial worries. As long as you’re puting away money diligently, don’t fret over the little things (like an iphone), reward yourself for a being a responsible saver.

  23. Shortly after my 21st birthday, I left a bad situation with about $20,000 in debt. I spent a couple years strictly budgeting myself to get rid of that debt, and the next few years simply living (well) within my means, on a relatively modest income. End result? In September I’ll be turning 28 and will have just purchased by first home with $50,000 down.

    Do I regret the sacrifices I made over the past 6 years? Absolutely not.

  24. Thanks for sharing such great post, we are earning without any of the future plans and spend it without any of the thought of tomorrow. According to me budgeting and minimize the use of credit card is the best way to save money.