Savings for Young Adults of Today

Simple key to future wealth: Save, invest early

For the under-35 set, the savings rate has gone from 5.2 percent in 2009 to minus 2 percent. While their increased spending is good for the economy, not saving will impair their ability to spend in the future or buy  a home, according to Mark Zandi of Moody’s Analytics.

Lack of savings leaves young workers without a financial cushion for unexpected expenses and for job transitions. So saving in an emergency fund should be their first goal.  Some make enough money so they could save, but spend it on their social lives and travel. Others have a retirement account at work but don’t invest  in it or anything else because, as one says, “It’s too complicated.”

How to get started on 401(k) savingsS

Building a nest egg might cost less than you think because employers match contributions at a generous rate. It’s usually between 50 cents and 100 cents on the dollar up to a set limit, usually 6 percent of your pay. The contributions are taken out of your check before taxes.

If you earn $30,000 annually and contribute 6 percent to your retirement plan, that works out to $150 a month, and your employer adds $75 to your account. You will pay $22 less in federal withholding each month and about $5 less to your state. In the end, contributions reduce your pay by $123 but your account grows by $225. Maintain this plan for 40 years and you’ll have over $l million socked away, says Kiplinger’s Personal Finance. If you are 25 or 30 years from retirement, the total would still be amazing.

How do you find the extra $123 a month (about $31 a week)? Pack a lunch, buy a used car instead of a new one, or add a roommate. Or you could find it by reducing your phone and cable costs, and spend less on dining out, and clothing expenses.