Young people under 30 generally tend to have problems with saving. The excuse made by most is that they don't earn enough to set aside part of it for saving purposes. This is a wrong mindset. No one is too young to save. In fact, saving at that early stage helps you attain your financial goal on time. There are other numerous advantages in having enough savings before you clock 30. It's all about cultivating a habit of saving and there are numerous ways to develop this habit. Nothing is stopping you from having a financial safety net savings account before you clock 30. This article will give you reasons why you should have savings as early as possible. We will also discuss what is appropriate for you to have saved before you clock the age of 30.
How Much Should I Have Saved By The Age Of 30
There is no exact figure as to how much you should have in savings by the time you're 30 years old. It all depends on a number of variables like your income, your financial obligations, financial goals, debts and so many other things. The most important thing is to have a saving culture before the age of 30. While we are all different and have different financial obligations and goals, it is important to have a general idea of what is considered reasonable savings at the age of 30.
While not putting yourself under any pressure, it is said that you should have an average savings of $47,000 if you're earning a relatively average salary. This estimation is based on the rule of thumb which says you should have a 1-year salary in savings by the time you start your fourth decade. The average weekly salary of persons between 25 and 34 in Canada is $979, and the average monthly salary within the same age bracket is $3,917, which makes an annual salary of $47,000.
If you have saved this amount or you're approaching this amount and you are not even 30,congratulations, you have met a financial goal. If not, do not put yourself under pressure, take this as a wake-up call and start your savings plan to save as much as you can before you clock 30. There is still time.
How Much Do I Need To Retire
This is a very common question among young people who want to start saving to secure their future and even those approaching retirement age. The truth is no amount is too small or big to have as your retirement fund, it all depends on the retirement lifestyle you have envisaged for yourself. Your retirement lifestyle will determine how much you need and how much will be enough to meet your lifestyle post-retirement. Knowing more about your income potential will secure your post-retirement lifestyle, although, emergencies occur which may affect your financial goals it is good to have some measure of control over your finances could give you the post-retirement lifestyle of your dream.
There is no benchmark of the amount you must have for retirement, it depends on your financial plan and your retirement lifestyle. However, to give you an idea, look at your lifestyle now and assess your expenses, then consider how these expenses will change when you retire, then you add some of the retirement benefits you will get from the Canadian Retirees Incomes: The Canada Pension Plan (CPP) or Quebec Pension Plan(QPP); The Old Age Security (OAS); Employer-sponsored pension plans and personal savings and investments. All these analyses combined should give you a fair idea of how much will be enough for your post-retirement lifestyle.
A survey showed that an average Canadian who retires at 65 will spend $60,359 including taxes until the age of 82. If you have a spouse and you both retire at 65, you will need $1,026,103 till you are both 82. These are average numbers which does not mean it has to be your numbers. Depending on the peculiarity of your situation, the money needed during your retirement may be lower or higher. This figure is only to give you an idea of the amount you should have in savings and investments before you retire.
Average Retirement Age
Globally, the age of 65 is regarded as the ripe age for retirement. Some retire before that while some retire way after that. Other than health reasons or years of service, it is the age most of the government retirement benefits are accessible to you. In Canada, you are eligible for the Old Age Security Pension, and Canada Pension Plan. The mandatory retirement age in Canada was 65 years until 2009 when mandatory retirement was abolished except for Judges, Justices of Peace and Magistrates.
Unless you are expecting an inheritance that will cater for you for the rest of your life, you are expected to work until the age of 50. That is usually referred to as the earliest retirement age. According to Statistics Canada, the average retirement age in Canada is 63 and a half years. The average retirement age for self-employed people is 68 years and 61 and a half years for federal workers. Private sector workers retire mostly at 65 years.
10 Ways To Save For 30
Developing a saving culture before the age of 30 is something that is now being encouraged. Covid 19 showed that anything can happen at any time and no one is too young to save. Even if you do not have a financial plan, endeavour to save as much money as you can, it is the key to securing your future. Here are some ways to save for the age of 30:
Treat Paying Off Debt With High-Interest Rates As Investment
Debt is an undesirable situation that most people find themselves in. You may have some debt situations in your 30s such as student loans, and credit card debts. One hindrance to paying off loans on time is the high-interest rate. However, if you focus on paying off the debt with the highest interest rate, you save more by taking it off the list. To have a better understanding of this strategy, you can read more about the avalanche strategy of debt management.
Have An Emergency Fund
Building an emergency fund is an effective way of developing a saving culture. Emergency funds are used to settle unexpected financial obligations without having to touch your other savings or investment funds. To build an emergency fund, you will have to set aside a portion of your income which means you are indirectly saving some amount somewhere for when you may need it. This emergency fund also protects your other savings should the need arise for you to fulfil a financial obligation.
Automate Your Savings
Automated savings allows you to set up a direct deposit into your savings account at specific periods. The amount to be saved will be determined by you, it only means you do not have the power to decide when you remit once you activate it. It is a very effective way of developing a saving culture early on in your life. You will not have to keep racking your brain for when you have to save or are tempted to miss this current month’s savings commitment.
Have a Budget
This is a tested and trusted method of instilling a saving culture. Having a budget will give you the necessary discipline to meet your financial goals. With a budget, you can track your income and expenses and stop impulse spending. To have a realistic budget, you can have weekly and monthly expenses to watch what you spend. It is important to stick to your budget. You must be intentional about your saving culture and having a budget is one way to go about it.
Cut Down On Your Expenses
To have an effective savings plan, you must separate your needs from your want and stick to them. Reduce unnecessary travelling, impulse buying, eating out and other things that take your extra cash. Channel this cash into building an emergency fund and other investment goals. Things you can cut down on include utilities, energy, taxes, food and groceries, auto expenses and credit card charges. The extra cash you make off the cutting down can be channeled into your savings plan.
This is another way you can save enough before you clock 30. You can subscribe to policies such as disability insurance and auto insurance. This ensures that you are catered for if events under this policy occur. It is a way of saving for the eventuality and protecting your investment fund.
Save More As You Earn More
At your current age, you are full of energy and take on multiple jobs for multiple incomes. Do not see this as an opportunity to spend lavishly, rather it is an opportunity to have more money saved before you are even 30 years old. Take advantage of your youth to secure your future. It is not a time to live extravagantly and forget there is a future you need to secure starting from now. At this stage of your life, your expenses should increase at a slower rate than your income.
Open High-Interest Savings Account
This complements your automated savings plan. You can have an automated savings plan with a high-interest rate. This will ensure your money grows at a higher rate as against the regular savings accounts. At this rate, you're not only saving, but you are also earning. It is a smart move that every young person should think of.
Understand The Concept Of Cash Flow
At this stage, your financial knowledge may not be that deep which is common with everyone in their 20s. However, you can be smart and start improving your financial knowledge. One thing you can start with is the concept of cash flow. This will help you in your budgeting plan. It teaches you how money comes in and how it goes out. It allows you to streamline your expenses and make wise financial decisions. Knowledge is power.
Do not think you are still young and you have decades to prepare. Time flies and you may end up regretting it. Things happen and you may not make as much later or you may make a lot more but because you have not cultivated the habit of saving, you lavish your income without thinking of the future. Be intentional about your finances and start saving now.
Review Your Progress
This is important for your motivation. Once your savings plan is in place, you can set up a monthly review of how far you have gone into meeting your savings goal. It also helps you change your strategy if it doesn't align with your financial goals.
These tips will help you develop a saving culture and still allow you to have enough fun in your youth. Do not mistake these tips as a gag on your youth, it is an opportunity to be smart and have fun at the same time. With an effective savings plan before you are 30, you are sure to continue living the lifestyle of your dreams till you're 80 and more.