Everyone should start learning how to manage their money early in life. Young adults should start saving and investing as soon as possible to lay a solid basis for their future financial aspirations. A 21-year-old should have saved how much, though? That may depend on many elements like income, expenses, and upcoming objectives.
According to a Bank of America survey, people between the ages of 18 and 24 save on average almost $2,000 annually. However, this sum may change based on unique situations. The widespread consensus is that you should have three to six months’ worth of spending set aside in an emergency fund. This can assist in defraying unforeseen costs like medical bills or auto repairs.
A fantastic approach to increase your wealth is by investing. Consider investing $10,000 in a high-yield savings account or a certificate of deposit (CD) if you have $10,000 available for immediate investment. These options provide moderate risk and big returns. Bear in mind, though, that the returns could not be as large as those from stock or mutual fund investing.
Think about making a $5,000 investment in yourself. This can be done through formal schooling, a certification program, or skill development that can eventually boost your income potential. To begin constructing your investing portfolio, you can also fund a Roth IRA or a brokerage account.
In terms of savings, it is advised to establish an emergency fund with at least three to six months’ worth of living expenses. This can assist in defraying unforeseen costs like medical bills or auto repairs. It’s also crucial to establish a separate savings account for short-term objectives like a car down payment or a vacation overseas.
A custodial brokerage account is a fantastic place for youngsters who want to start investing. This enables parents or legal representatives to open an account on the minor’s behalf and maintain it until that person reaches the legal age of majority. Teenagers should be taught the fundamentals of investing, including the value of diversity and associated risks.
In summary, developing sound financial judgment is a lifelong ability that begins at an early age. Early saving and investing are crucial for laying a solid financial groundwork for the future. Depending on your specific situation, you may want to save or invest more money, but it is generally advised to have three to six months’ worth of spending set aside for emergencies and to make long-term investments in your future.