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How young people are saving money in a tough economy

by SuperiorInvest

Shea German-Tanner tries to put some of her paycheck, even if it’s just $50, into her savings account. But most of the time, she has to divert cash back into her checking to afford her expenses. Ms. German-Tanner, 22, has about $600 in her savings account right now and hasn’t started saving for retirement.

“Everybody tells you to save money and do this and invest, and I feel like I can’t do that because I’m living paycheck to paycheck,” said Ms. German-Tanner, a social worker in Fort Wayne, Ind., who makes about 40,000 dollars a year, he said. She said she feels as if inflation is hindering her ability to save money.

Young people just starting to hit their stride as they enter adulthood struggle with how to balance their income and spending priorities so that they have money left over for emergency and retirement savings. Taking care of savings has always been difficult for twenty-somethings who start their careers at the bottom of their earning potential. But saving is especially difficult now because, in addition to paying off student debt, housing and food costs remain high, even as inflation it started to cool down.

Ms. German-Tanner said 20-somethings are often encouraged to take financial steps like building emergency funds, saving for retirement and paying down debt. It is recommended that they invest when the market is falling and start thinking about their futures as early as possible. The Movement of FIRE (short for “Financial Independence, Early Retirement”) has been celebrated in recent articles and videos about budgeting and saving in Roth IRAs have taken over Tick ​​Tock.

“I feel like the older generation is constantly pushing you to do the things they did when they were in their 20s, but it’s not even comparable to when they were in their 20s,” Ms German-Tanner said.

Theresa Fairless, a 25-year-old project manager in Aberdeen, New Jersey, said paying off her student loans is her priority. Ms. Fairless graduated college in 2018 with approximately $25,900 in government loans and $50,000 in personal loans. She has paid off all of her personal loans so far and has about $23,000 left in government loans due to default during the student loan moratorium.

“I was the first person I knew who had to deal with the loans,” Ms Fairless said.

She has been living at home since graduation and recently moved in with her boyfriend in an apartment nearby, but he pays a larger share of the rent than she does because he makes more money. Ms. Fairless, who earns about $65,000 a year, also gives money to her mother every month because her father recently died and her mother has no savings.

When Ms. Fairless lived at home, she gave her mother $300 a month. Now he gives her $200. He also saves about $160 a month for retirement in a 401(K) plan, puts $100 into a stock portfolio, and tries to save $50 to $200 in a savings account.

“I always wanted my emergency fund to be $10,000,” she said. “I have it there and I feel like I need it to be more. I honestly feel like I’m not just saving for myself—I’m saving for my mom because I know she doesn’t have one.”

For Thea Pham, a first-generation Vietnamese immigrant, sending money to her family is also a priority. Ms. Pham, 27, is married and lives with her husband in Los Angeles. Ms Pham works in finance and could not say exactly how much she earns because of regulations on her job, but said most people in her position earn between $160,000 and $250,000 a year. She also has a TikTok account with over 450,000 followers where she posts about mental health issues. Ms. Pham acknowledges that she has achieved financial stability, but said she does not have the flexibility to spend like friends with similarly high incomes because of cultural expectations that she must support her family in Vietnam.

“I actually send most of my paychecks home to my family,” Ms Pham said. “I didn’t know that Americans don’t do that and how abnormal it is.

Ms. Pham said most of her husband’s paychecks go toward housing and living expenses, of which she contributes up to 20 percent. Any remaining money he earns goes into retirement and investment accounts, expenses such as travel or when relatives ask for money.

Kathia Ramirez, 24, juggles several part-time jobs while preparing to enroll in college. Ms. Ramirez, who lives in Bensenville, Illinois, in a house with her mother, sister and nephew, dropped out of school during the pandemic because she didn’t want to take classes online.

“I love living at home,” Ms. Ramirez said. “It helps me save money. I have a really good relationship with my family.”

Between her gigs at a Mexican seafood restaurant, editing videos for social media and doing data entry for a production company, Ms. Ramirez said she makes about $2,000 a month, though her income varies based on tips and how much she works. He saves $200 to $300 a month in a savings account. Otherwise, they spend money on groceries, gas, and clothes. She hasn’t thought about saving for retirement yet.

Zach Teutsch, a certified financial planner and managing partner at Values ​​Added Financial, suggested that young people focus on big expenses instead of small luxuries like coffee or subscriptions.

“Big decisions matter a lot more than small decisions,” Mr. Teutsch said. “Contrary to some of the advice out there, most people in their 20s should worry more about work, housing, transportation and less about lattes and Netflix.”

Mr. Teutsch said time spent worrying about a small purchase could be better spent navigating your company’s 401(k) plan. He also stressed the importance of building an emergency fund to cover unforeseen expenses. While many financial advisors suggest having three to six months of expenses saved, even $100 can “make a huge difference,” he said.

For young people, Mr. Teutsch said, it’s a good idea to start educating yourself about personal finance and talk about financial issues with friends or join social media to share how you’re saving money.

“This is a great time to learn more about money and find unbiased educational resources,” he said.

Haley Persichitte, 24, of Denver, makes fitness and exercise a priority and spends money on Barry’s Bootcamp, CorePower Yoga and ClassPass subscriptions. She has monthly car and rent payments and also likes to go out to dinner with friends. Ms. Persichitte did not go to college and works as a housekeeper for a family nearby. She manages to save about $600 a month, mostly for emergencies. Ms. Persichitte has saved about $15,000 so far, though she said high food and gas prices have made it harder to save lately. Saving for retirement, she said, “didn’t occur to me.”

Brian Teitelbaum, 28, has taken many of what he considers the right financial steps: He has an emergency fund, started investing money and contributes to both a 401(k) and a Roth IRA Mr. Teitelbaum makes about $90,000 a year. a project manager in New York and tries to use the subway and cook at home to save money. His monthly rent is $1,650 and he spends about $300 a month on groceries. He said he didn’t notice inflation as much as people outside of New York, but he did pay attention to the high prices at the grocery store.

Mr. Teitelbaum has no student debt and saves about $2,000 a month. He puts about $600 a month into his 401(k), $500 into his Roth IRA and between $800 and $900 into investment accounts. Mr. Teitelbaum said automatically depositing portions of his paycheck into various savings accounts helped him.

“I think my favorite thing about finance these days is auto-deposit,” Mr. Teitelbaum said.

Mr. Teitelbaum also stressed the importance of talking about money with family members. He said he credits his father for giving him most of his personal financial knowledge, and that friends from families who didn’t talk about money weren’t as financially literate.

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