How young people are saving money in a tough economy

Shea German-Tanner tries to put some of her paycheck, even if it’s only $50, into her savings account. But most of the time, she has to redirect the money to her check to pay her expenses. German-Tanner, 22, currently has about $600 in her savings account and hasn’t started saving for retirement.

“Everyone tells you to save money, do this, and invest, and I feel like I can’t do that because I’m living paycheck to paycheck. Ms. German-Tanner, a social worker in Fort Wayne, Ind., who earns about $40,000 a year, said. She said she felt inflation had hampered her ability to save money.

Young people who are just beginning to gain a foothold in adulthood are wondering how to balance their income and spending priorities so that they have money left over to save for emergencies and retirement. Worrying about savings has always been difficult for people in their twenties who start their careers at the lowest of their earning potential. But saving is especially difficult right now because in addition to paying off student debt, housing and food costs remain high even as inflation has risen. started to cool.

Ms German-Tanner said people in their twenties are often encouraged to take financial steps such as building up emergency funds, saving for retirement and paying off debt. They are advised to invest when the market is down and start thinking about their future as soon as possible. The FIRE movement (an acronym for “financial independence, early retirement”) has been glorified in recent articles, and videos on budgeting and saving in Roth IRAs have taken over. ICT Tac.

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

Theresa Fairless, a 25-year-old project manager in Aberdeen, NJ, said student loan repayment was her top priority. Ms. Fairless graduated from college in 2018 with approximately $25,900 in government loans and $50,000 in personal loans. So far, she has paid off all of her personal loans and has about $23,000 left in government loans to repay, as she has not made any payments during the student loan pause period.

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

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

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

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

For first-generation Vietnamese immigrant Thea Pham, sending money home is also a priority. Ms. Pham, 27, is married and lives in Los Angeles with her husband. Ms Pham works in finance and was unable to disclose exactly how much she earns due to regulations surrounding her job, but she 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 she has achieved financial stability but said she lacks the flexibility to spend like friends with similar high incomes due to cultural expectations she has for supporting her family. In Vietnam.

“The majority of my paychecks are actually sent home to my family,” Ms. Pham said. “I didn’t know Americans didn’t do that and how abnormal it was.”

Ms. Pham said most of her husband’s paychecks go to pay for their housing and living expenses, of which she contributes up to 20%. Any remaining money she earns goes into retirement and investment accounts, expenses like trips or when relatives ask for money.

Kathia Ramirez, 24, juggles several part-time jobs as she prepares 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 online classes.

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

Between gigs at a Mexican seafood restaurant, editing videos for social media and data entry for a manufacturing company, Ms Ramirez said she earns around $2,000 a month, although her income varies depending on tips and work. She saves $200 to $300 a month in a savings account. Otherwise, she spends money on groceries, gas, and clothes. She hasn’t thought about saving for her retirement.

Zach Teutsch, certified financial planner and managing partner at Values ​​Added Financial, suggested young people focus on big spending choices rather than small luxuries like coffee or a membership.

“Big decisions matter a lot more than small decisions,” Teutsch said. “Contrary to some advice, most people in their twenties should worry more about jobs, housing, transportation and less about lattes and Netflix.”

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

For young people, Teutsch said, it’s a good idea to start self-educating about personal finances and talking about financial issues with friends or engaging on social media and sharing how you save money.

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

Haley Persichitte, 24 in Denver, makes fitness and exercise a priority and spends money on Barry’s Bootcamp, CorePower Yoga and a ClassPass membership. She has a monthly car payment and rent, and also enjoys going out to dinner with her friends. Mrs. Persichitte did not go to university and works as a house manager for a neighboring family. She manages to save around $600 a month, mostly for emergencies. Ms Persichitte has saved around $15,000 so far, although she said high food and petrol prices have recently made saving more difficult. Saving for retirement, she says, “didn’t cross my mind.”

Brian Teitelbaum, 28, has taken many of what he considers to be the right financial steps: he has an emergency fund, has started investing money, and is contributing both to a 401(k ) and a Roth IRA. Mr. Teitelbaum earns around $90,000 a year as a project manager in New York, and he 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 the inflation as much as people outside New York did, but he did pay attention to the high prices at the grocery store.

Mr. Teitelbaum has no student debt and saves about $2,000 per 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 different savings accounts helped.

“I think my favorite thing about finance these days is autodeposit,” Teitelbaum said.

Mr. Teitelbaum also stressed the importance of talking about money with family members. He said he owed his father for providing him with much of his personal finance knowledge and that friends from families who didn’t talk about money didn’t have as much financial knowledge.

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