The Importance of Saving Your Money Starting at a Young Age

Jeremy BiberdorfBy: Jeremy Biberdorf

March 18, 2015March 18, 2015

The Importance of Saving Your Money Starting at a Young Age

Saving doesn’t come naturally to most of us. When you’re young, it’s hard to grasp the real value of money. You might watch your friends blow lots of cash on new clothes and toys, or living beyond their means with credit. Young Invincibles might feel little reason to save, because all of their needs are met, and there’s so much more life yet to come.

Once you’ve spent two or three decades on earth, you start to understand how hard it is to make money. You also learn how unpredictable life can be. Jobs disappear. Health fluctuates. Marriages and partnerships come to an end. Without savings, it’s hard to live a stable life as you get older. People who start saving young put themselves at an enormous advantage as life goes on.

If you’re young and debt-free, congratulations. Here are a few ways to make the most it, through saving and early investment.

This is How People Save Money

  • Save Before You Spend. Whenever you get money from any source, put some of it into savings before you spend on anything else. A 15% savings rate is a good goal for most people, but young people can sometimes save far more. If you live with your parents, or otherwise have your needs met by other people, save as much of your disposable income as possible. Saving and investment started early in life using Motley Fool picks will reap much greater rewards than those begun decades later.
  • Work Out a Deal With Your Parents. This won’t be possible for everyone, but take advantage of this if it’s possible for you! Some parents/grandparents/guardians will match your savings. That means if you are able to save $25 from your weekly paycheck, your parents might be willing to give you $25 more. Some parents are more than willing to give their children money for the future, especially if it is put in an account which is not accessible until later in life.
  • Consider Opportunity Costs for All Purchases. One of the most important aspects of investment is compound growth. Through the power of interest, dividends, and reinvestment, conservatively invested savings can double or triple in 10 years, sometimes multiplying by 10x in 30 years. Obviously, the earlier in life you start investing, the longer you’ll have to let it grow. Every time you spend money as a young person, you are depriving yourself of wealth later in life. This is called opportunity cost. Think about that the next time you buy a $50 video game. Is it worth missing out on $150 in 10 years, or $500 in 30 years?

More Tips for Big Savings

  • Don’t Carry Around Lots of Cash. It’s too easy to spend impulsively when you’ve got lots of money in your pocket.
  • Get a Savings Account With a Good Interest Rate. Reserve a certain percentage of each paycheck, and the interest rate will make it grow little by little. When you’ve saved enough to help you through the next several years, start investing everything else.
  • Don’t Buy What You Don’t Need.
  • Plan to Be a Millionaire. If you start investing 10 years before most people, you will have many hundreds of thousands of dollars more when it’s time to retire. Even if you simply max out your IRA every year starting at age 18, you’ll almost surely be a millionaire when you retire.
  • Save Your Change. Put your spare change in a jar. Roll those coins up and deposit them in the bank.
  • Budget! Have set spending rules for every dollar you make.
  • Start Working Young. The sooner you can have your own income, the sooner you can set yourself on a course for lifelong wealth and security. Teenagers and students have many opportunities to make money.

The trick to saving your money is to begin now. The money you save at a young age adds up quickly. Tip: start an M1 Finance Roth IRA to make it add up even more quickly! Through this process, you will learn the importance of saving and being financially responsible, something that most adults fail to understand. With good financial skills and lots of hard-earned wealth, you’ll have a lot better life options as you enter adulthood than most people can dream of. Good luck!

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Jeremy Biberdorf
Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. He's a father of 2 beautiful girls, a dog owner, a long-time online entrepreneur and an investing enthusiast.

10 thoughts on “The Importance of Saving Your Money Starting at a Young Age”

  1. I think we all wish we saved more as teenagers. I was pretty good at saving for a goal like a car, the problem was that once I reached my savings goal I spent the money! Very few teens think about retirement as a savings goal or the importance of an emergency fund.

    1. John @ Teens With Money

      Thanks for the comment Paul! As a teenager it can be hard to realize the long term benefits of saving money. They think, “Why should I save my money when I can go buy whatever it is I want and have it now?” It’s just a matter of teaching them that it is far more sufficient to start putting a little away at a time, rather than splurging and impulse buying gadgets that will probably only be used few times.

  2. Abigail @ipickuppennies

    My parents *made* me save. I had an account that was more or less in trust. I couldn’t withdraw anything or even cash a check without them.

    So I got to keep $20-40 a month from the paychecks I earned. Plus 50% of any holiday, birthday or babysitting.

    My account was pretty healthy when I graduated high school. Although admittedly it was helped by the Alaska Permanent Fund dividend each year.

  3. John @ Binary Today

    I’m one of the very few that was actually a minimalist as a teenager. I wanted but I never splurged and I still barely splurge 10 years later because my focus is on money as time not money as consumption.

  4. I wish that I had this information available to me when I was younger! Who knows how much money I would have.

  5. Ben van den Berg

    I do agree it’s very important to teach our youngsters how to deal with their money. It seems that whole generations didn’t get this knowlidge from their parents looking at all the credit card depts these days. Therefore I try to teach my kids not to spend anything what they don’t have. That’s lesson number one!

  6. Learning to save as a teenager is a great thing because the habits we develop will carry through for the rest of our lives. It will be much easier to get ahead financially be having the habit of saving early on.

  7. Jayson @ Monster Piggy Bank

    At a young age, I would never apply for a credit card. Doing so would tempt me to gain debt and be a hindrance to my financial journey.

  8. Even now, as an adult, if I don’t want to spend too much, I take less cash with me. I have noticed that, if I carry to much, I’ll be tempted to buy more stuff that I think we need.

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