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Save your raises. Whenever you get a salary raise or bonus, save it. After all, you were living without it before — you’ll survive. Pretend like it never happened and put it into your savings or investment account. Budget your savings. We’ll explore budgeting in depth in a later chapter, but all financial experts recommend having a household budget. Know where your money is going every month. They also recommend treating your savings as a high priority budget item. Too many people treat saving as a budget afterthought — an item paid if and when the funds are available. Factor your monthly savings contribution into your budget as a “must pay” expense. Take advantage of all savings tools. We’ll explore retirement plans in depth in a later chapter, but suffice to say that if your employer offers a retirement plan, enroll on day one! It is a no-brainer, absolutely essential and effortless way to build wealth at a healthy rate, with an actual real life goal (retirement) and time line (retirement age) built in. Reflect on Learning: Can you list strategies for developing a savings habit? Answer: Start early, pay yourself first, automate savings, use a round up app, save raises, budget savings, join an employer’s retirement plan and savings plan, if offered. Which of these savings strategies seem easiest to you? Which are you most likely to do? Are you already following any of these savings strategies? PRODUCT PREVIEW The rate at which Americans save money has declined precipitously, with many people living paycheck to paycheck. Don’t be one of them. Develop the savings habit early in life. Have an emergency fund of 3-6 months of living expenses tucked away in a savings account, then set your short term and long term financial goals and begin saving and investing to achieve them. With regard to building wealth, time is a powerful ally. Through compounding, small savings with regular deposits grow substantially. Use automated savings, retirement accounts, and round up programs to build wealth. THE BIG PICTURE
PONDER AND PREDICT One day in the not too distant future, you will be responsible for putting a roof over your own head. Is housing an expense or an investment? Can it be both? ______________________________________________________ ______________________________________________________ ______________________________________________________
THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY 141
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