Savings mistakes to avoid at every age

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It’s never too early to start saving. Learning the true value of money can never come soon enough. Whether you’re self-taught or have loved ones who can show you the way, making important savings steps is vital to your financial future.

To be sure you’re on the right track, learn from other people’s mistakes. Nick Holeman, CFP, a senior financial planner at Betterment, says it’s important for people to build good savings habits as early as possible — even in your teenage years.

“If you’re a parent with a teenager, this is a good time to open a joint checking account,” Holeman says. “Teach your teens how to manage money, budget and track their spending. Encourage your teen to open an IRA when they get their first job.”

Regardless of age, there are certain mistakes to be mindful of at every age.

Savings mistakes to avoid for 20-somethings

Graduating college and dealing with the burden of student loan debt can make you feel like you barely have enough to make ends meet, let alone stash money away. Dawn-Marie Joseph, president and founder of Estate Planning & Preservation in Williamston, Michigan, believes an emergency savings fund is critical at this stage.

“Recently, I was working with a college graduate who is paying $500 per month in student loan repayment,” Joseph says. “Bills like this can be overwhelming and take your focus off the future. Building an emergency savings can help with the loss of a job or vehicle repair.”

Joseph recommends putting money into a savings account from every paycheck, even if it’s only $5 or $10. It will add up.

Holeman notes that putting off retirement savings can hurt, too.

“It might seem like it’s a long way off, but the time to start saving for retirement is in your early 20s,” Holeman says. “Is a 401(K) or other retirement plan offered by your employer? If not, open an IRA and start making that money work for you.”

Savings mistakes to avoid for 30-somethings

Life in your 30s is much different than your 20s. Your job might be a little more stable. Your paycheck might be a bit higher than it was a decade ago. Your goals might be different, too. Maybe you want to buy a home or expand your family.

“Supporting children is a big expense,” Joseph says. “You’re likely still paying down your education debt, but you’ll have to learn how to manage new expenses as well. This is when you’ll need to develop a savings habit.”

It might be hard to factor in the added cost of a child, but it’s possible once you budget for it. Restructuring your budget is important for any major change in your life, so research those expenses and crunch the numbers and figures beforehand so you’re not caught off guard.

If children aren’t in your plans, but buying a home or getting married are, you should still lay out a budget reflective of those lifestyles.

“Whether it’s a wedding, a house, a big trip or college for your kids, each of these goals has a different amount needed and a different time horizon,” Holeman says. “Decide which of these goals is most important to you and how much you have to save each month to achieve them.”

Instead of having a regular savings account, look into high-yield savings accounts. These are accounts that pay a higher annual percentage yield than traditional savings accounts. The best offers are more than 2.00 percent. Try to find accounts that charge low or no fees as well. The less money taken out for fees, the more you can save for the big milestones to come.

Savings mistakes to avoid for 40-somethings

Retirement feels closer than it did a few years ago. By now you may have a solid hold on your budget. You’re trying to save but might not be doing as well as you think you are.

“Your 40s are when your financial responsibilities become palpable,” Holeman says. “One of the biggest mistakes people in their 40s make is not countering ‘lifestyle creep.’”

Lifestyle creep is when you start to spend more as you earn more. While earning more money is great, that doesn’t mean you should overspend to keep up with the Joneses. Live within or below your means and save for major financial goals.

Those goals may include helping your children pay for college tuition, retirement or paying off your house. Instead of spending more, keep saving for your future or those of your loved ones.

Savings mistakes to avoid for 50-somethings

If you have children on their way out of college, do they know how to handle the financial responsibilities of adulthood?

“Take the time to have a serious discussion with (your kids) about what they plan to do after graduation,” Holeman says. “It’s great to help out your children, but you’ll want to make sure you’re not jeopardizing your own security.”

That means you don’t want to jeopardize your own retirement by helping your children start their own lives after school. Set clear rules and expectations. Continue to put as much away for retirement as possible. And use any extra money to make catch-up contributions to your accounts.

Holeman also suggests having the difficult but necessary conversation about death.

Estate plans provide a roadmap for important decisions regarding your health and assets, and generally cover two phases: before and after your death,” Holeman says. “By having one in place, you’ll remove any ambiguity around your wishes when it comes to protecting your family, loved ones and assets, in case you’re unable to do so.”

Savings mistakes to avoid for 60-somethings and beyond

Your best working years are behind you, but that doesn’t mean you need to stop working. But you should still plan ahead.

“At this age, the biggest mistake is underestimating your needs,” Holeman says.

Those needs won’t be what they were 10 or 20 years ago. Consider rising healthcare costs and downsizing your living space. Evaluating how you’re living or planning to live will impact your savings.

“In order to make sure your bases are covered, budget for the ‘boulders’ in your life — the large or recurring items you prepare for monthly, such as your rent, mortgage or car payment,” Holeman says. “Once that’s done, monitor your personal checking account for how much is safe to spend until the next month.”

At this stage in life when your income is more fixed or even reduced, it’s important to watch your budget closely, save for unexpected expenses and cut back on spending.

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Written by
Dori Zinn
Contributing writer
Dori Zinn has been a personal finance journalist for more than a decade. Aside from her work for Bankrate, her bylines have appeared on CNET, Yahoo Finance, MSN Money, Wirecutter, Quartz, Inc. and more. She loves helping people learn about money, specializing in topics like investing, real estate, borrowing money and financial literacy.
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