Why Its Insanely Important To Save in Your 20s and 30s

The Facts

The fact of the matter is that when you are young, time is on your side. And the more time you can set aside for yourself, the more money you can save. If you started saving at 35 instead of 25, you would have lost 10 years of massive savings. Your savings rate would need to be much higher to have the same savings as that smart 25 year old. Just take a look at this simple article from Business Insider that shows the ending savings balance of a 25 year old vs a 35 year old. The difference is staggering.

It’s All About Habits

If you are in your 20s, chances are that you aren’t earning much. But you probably don’t have many expenses either. Saving in the beginning will be painful. And many times you will go back to your old habits of wastefulness. But I assure you, that if you are resilient and you keep fighting the urge to burn your cash, you will eventually enter a lifestyle where saving will become a part of your personality. Once your savings build the urge to continue will increase. Losing weight is a concept that is almost identical to saving money. You start, you stop, you start, you stop. But once you do it for long enough, only then do you see a slimmer self. Habits are best formed earlier in life. They are stored in a deep part of the brain which we don’t forget.

What You Should Do

Every time you earn a dollar, the first thing you need to do is to deposit it in your bank. If you make these small deposits on a continuous basis, you have now created a habit. You will need to reinforce this habit until you are living a continuous life of a smaller footprint. Most expenditures are wasteful: TV, cable, internet subscriptions, eating out (huge one!), random frappucinos, clothes shopping, makeup shopping, shoe shopping, and gadgets shopping. We all splurge on something that we really love. A bunch of small cost savings amount to a big number at the end of the day.

Verdict: It is painful to begin saving. The harder you try the quicker you will develop this skill. Bite the bullet and save now so that you can live comfortably later.

9 thoughts on “Why Its Insanely Important To Save in Your 20s and 30s”

    • Jerry, that sounds like a plan. Can’t go wrong with low cost index funds. Long term in the market always wins out. Stay tuned for an article comparing online discount stock brokerage accounts. Also subscribe so you can stay within our ecosystem.

  1. One of my biggest regrets from my first job is that I burnt through almost every single dollar. I was still living with my parents so expenses were minimal, yet I spent everything. Wasn’t till after I got married that I learned the importance of budgeting and saving. Had I known this when I first started working I could have tucked away $15-20k.

    • Hi Zanub! It never is too late to start getting the finances together. It’s very simple to tell people to cut spending everywhere. However, a better strategy is to pick the top 3 offenders and cut them out.

  2. Which way should a young 20 year old save? Mutual funds? Roth Ira? Banks offer no interest now a days so banks aren’t really a good option anymore. Could you give examples how young people should best take advantage of what’s out there in terms of saving plans….

    • I would definitely get a checking account and an online savings account started. Start socking money away aggressively especially if you are young. I would then invest a sizeable portion of the savings into low cost index funds and keep them there for the long haul. Markets drop from time to time, but long term strategy beats all.

  3. totally agree- saving early on can make a huge difference in building financial freedom. Time value of money and compounding are on your side when starting early.


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