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Common savings mistakes to avoid at every age

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It’s important to build good savings habits as early as possible, but there are certain mistakes to be mindful of at every age. Here are some of the most common savings mistakes to avoid at every age.

Savings mistakes to avoid for 20-somethings

Graduating from college and dealing with student loan debt can make you feel like you barely have enough to make ends meet, let alone stash money away. However, building an emergency savings fund is critical at this stage.

Putting a little bit of money away into a savings account on a regular basis will really add up — even if you’re only adding $5 or $10 from each paycheck. It can be easy to get bogged down by all the bills you’re responsible for right now, but looking at your savings deposits as part of your monthly expenses will help you later.

Instead of saving in 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 accounts pay around 0.6 percent. Try to find accounts that charge no fees.

You also want to look as far ahead as retirement — saving for retirement right now will help you later. Check to see if your employer has a 401(k) plan or similar retirement plan. That’s a great place to start. Many employers match a portion of your contributions, so be sure to contribute enough to get as much of the match as possible — it’s essentially free money. If a 401(k) isn’t an option, look into setting up an IRA.

Savings mistakes to avoid for 30-somethings

In your 30s, your job might be a little more stable and your income might be a bit more substantial than it was a decade ago. Your goals might be different, too. Maybe you want to buy a home or expand your family.

Because your financial and family situations are likely different now, your savings situation should change too. If you’re no longer the only person you have to look out for financially, you need to understand how to manage your expenses.

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 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 create a budget.

“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,” says Nick Holeman, CFP, a senior financial planner at Betterment. “Decide which of these goals is most important to you and how much you have to save each month to achieve them.”

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 road map 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 health care 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.