Six Secrets to Saving Money When You Are Young

Photo courtesy of lrargerich

While perusing a few of my favorite personal finance blogs over the weekend I ran across an article last week from All Financial Matters, One Reader’s Reasoning On Why Younger People Don’t Save.  I like the way JLP addressed each concern raised by the commenter, whose attitude reminded me a bit of myself at that stage in life.

I went away to school and came back with a credit card and small pile of student loan debt, but no degree.  I thought I was pretty financially savvy, so almost immediately after starting a new job I signed up for their 401(k) plan, employee stock purchase plan, and even a Roth IRA.  I started socking money away and felt pretty good about myself. The problem was I wasn’t addressing the debts I had accumulated earlier while away at college.  I was paying minimum payments and continuing to use the credit card to finance life’s luxuries–vacations, new clothes, baby furniture, etc.  I was eager to start saving, and neglectful in repaying debt, and controlling spending.

Eventually, it caught up with me and by my late twenties I realized I had to address the debt or I would continue running on this financial hamster wheel for the rest of my life.  I halted my Roth IRA contributions, temporarily, and dropped back on my 401(k) contributions.  I also suspended my employee stock purchase plan because that money could be better spent repaying debt, and because the idea of not being diversified began to bother me as the company I worked for developed serious issues.

Looking back I realize now that I was smart to start saving early, but I jumped in with both feet, when I was really only ready to get my big toe wet.  So heads up young friends, here are a six secrets to save money when you are just starting out:

  • Try to save half of your income.  If you are at a stage in your life where you don’t have kids to care for, and haven’t accumulated much debt yet, you may be able to pull of saving half of your income.  If you can do this, you are essentially buying yourself one month of early retirement each month you adhere to this plan.
  • When it comes to savings, no amount is too small. If you are like most of us, and are not able to save half of your income, just start saving something.  You might think saving a measly $20 a paycheck, or $50 a month is not worth it.  Not true.  In fact, consistent savings is a sure-fire way to build a small emergency fund that will keep you away from the financial edge early on.
  • Establish a comfortable style of living early, and keep it that way.  It doesn’t matter how much you save if you constantly increase your style of living.  A new car every four years, and a housing upgrade every seven, will not put you on the fast track to building significant wealth.  The best way to save money when you are young is to keep expenses as low as possible, for as long as possible, and stash away every bit of savings you can.
  • Stay away from malls, televisions and catalogs.  All three are designed with one objective–to separate you from your money.  And it isn’t just advertisers that do it.  Peer pressure has forced many otherwise financially savvy people into bankruptcy.  When we see others on television driving nicer cars, wearing nicer clothes, and living in nicer homes, it is natural to be a little envious.  Hollywood sets an unrealistic expectation of how things work in the “real world,” so don’t buy into the hype.
  • Ignore what others think.  Talk about feeling like you are on an island!  Just wait until fellow graduates and friends hear about your one-bedroom apartment within biking distance of your new job.  Are you nuts?  You have a college degree!  It’s time to buy that big house in the suburbs, or that upscale condo downtown, and finally upgrade that beater you’ve been driving throughout school.  Ignore this advice.  Develop some thick skin, and stick to your plan.  In a few years, you will be the one laughing–all the way to the bank!
  • Move slowly.  While it is important to get an early jump on investing, only do so when you are on solid financial footing.  Also wait until you have a full understanding of the investment vehicle and the various options.  Don’t start a Roth IRA because it just sounds sexy.  Don’t put all of your 401(k) money in international equities because your boss’s “investment guy” said it was a smart move.  Only move on to the next step when you think it is a smart move.

The most important step in saving money when you are young is to simply start.  I recommend opening a high-yield savings account with ING Direct today!


  1. I think it’s important to establish a savings goal for yourself, a reason for doing the six things you recommend. Half your income for no defined reason is difficult, but half your income so you can put a downpayment on a home? That’s a reason and that’s good justification for when you don’t go out with friends (“Not going out tonight because I’m saving for a house”).

  2. Great article. I think the best one is “Ignore what others think”, yet the hardest because 70% of the population has a personality type of a responder.

  3. I think teaching kids about financial responsiblity young is essential to their sucess when they get older. We even try with our nine year old. He always needs to ask himself, “do I really want this”, before he buys it. Beleive it or not he decides no, more than our 14 year old. Thanks for this post!

  4. This is one of the best posts I’ve read recently. It makes so much sense.

    I have recently been telling a few of the 24 yr olds in work that they have a great start on me – I’m 32 – and that they should consider these things early. They’ll be pretty much on the way by the time they’re 30.

  5. This was a great post! It is so true that young people have SUCH a hard time saving, or even understanding why. I’m one myself… I wanted to offer your readers a link to another blogger who is doing great work. He writes about our ‘childhood money messages’ and how the best approach to stability in today’s market is to resist letting these emotions control our buying/selling habits. It is really fascinating work, and something you should all check out. His name is Spencer Sherman, and you can view his blog at

  6. i did save 50% of my income (at least) all the way from when i was first living on my own at two weeks shy of turning 15 up until now at 53. i’ve never been without a job and usually worked two two three part-time jobs in lieu of a full-time one, as i felt more in “control” of my boss than they of me.

    i must tell you life is strange when you don’t do what everyone else does. at 40-something i had never had a credit card or loan and purchased my first home — a beautiful condo. i never wanted to own, but always knew if i did, it would be for CASH — just like everything else. never bounced a check, never paid a fee or interest. used “money” mag to find the best rates on CDs in the nation and bought only 5-year ones.

    then came US savings bonds. everything fell into place JUST right. i sold my condo two years after i bought it for twice what i paid, and went back to the lifestyle i enjoy — RENTING!

    i have consistently climbed that ladder and have had my own successful business for 13 years. you HAVE to pay NO ATTENTION to anything anyone tells you financially speaking. you have to be dedicated. you can do it. i know cos i did.

    one last one — NEVER a borrower NOR lender be.

  7. As an analogy to explain why you might want to be “different” in your financial habits than your other young peers, consider that probably only one out of ten thousand people in your town or city is a significant property owner. (Owning more than three commercial or residential income properties besides their residence) In other words, they are unusual and rare, statistically, and, like perhaps you saving half of your income, they do things financially that many or most people don’t do.

    So maybe being unusual and bucking the trend by saving half of your income can put you into this group of people, who are generally extremely secure financially. Being and acting differently in terms of your finances can be good, in other words.

  8. I started saving since I started working in 2005. Now, I appreciate much what I am doing for i have saved much more bigger, I feel that I like to save more. In the beginning, saving for me was an ultimate sacrifice. But now, I enjoy saving much.

    After five years, I own a house now. So glad that before I did not rent a room ‘coz I stayed with my aunt and the workplace is just a walking distance about 4 minutes.

    I am from the Philippines.

    Invest your money in the Cooperative for at the end of the year you will receive as much as 20% of your share capital, Commercial banks cannot.

  9. am 21yrs old.. i ll start from here with Ur tips, am very happy to read this…i believe the end of this month i ll save more.

  10. This is a good post. I am 26 years old, sell mortgages for a living, and have mad around $275K in the last 2 years. Believe it or not, I still have a hard time saving money. I have around $40K saved in savings, $19K in 401K, and have paid off $20K in student loan debt. Also bought new car, rolex, house; and have debt on all. There should be more in the bank, but I have enough confidence in myself that I will keep bringing in the money. My advice, is to not settle for less. Try to find the highest paying job early on; then save as much as you can. You will be set for life. The high paying jobs are those that require extreme dedication, hours, and stress. Don’t be one of these people that says that they want to do something that makes them happy becuase they are afraid of failure. Then you will not have to worry about trying to scrimp to save $200/month because you make $30K/year. If I can do it, then anybody can do it!

  11. I would recommend financial patience. You do not have to keep up with your friends and you don’t need to shop, eat out and vacation so much. Focus first on paying off debt. Next build up your savings. Don’t go into credit except maybe for an education, a house or a business. Even then be careful – walk away if it is not right. Pay cash for everything. I just bought my first car cash a couple months ago. I used to think that sounded good but impossible – who has that kind of money? My neighbors have college debt, house debt, and several cars debt, eat out and shopping debt – on junk and it’s all junk. They live pay check to pay check and before pay day cannot do anything. They are stuck. It is a bad path – don’t walk down it. Pause and let your cash build up.