Dec 16: BEST OF THE BLOGOSPHERE

December 16, 2024

Six smart money moves for the younger set

When this writer thinks of his own terrible money habits in his 20s – no budget, no savings, living payday to payday, high debt – the memory is cringeworthy.

We wish we had been able to read CNBC Select’s article, “Six Money Moves to Make in Your 20s,” back in the day. But for those of you blessed to be young, this article has some great concepts.

First, the article recommends, “create a budget and stick to it.”

“While it may seem like a lot of work to create a budget, there are numerous online resources and apps that can help you. Plus, once you have one, the majority of the work is done, and you can tweak it as your spending habits or income change,” the article advises.

“After you create a budget, it’s important to stick to it. Regularly check-in with your budgeting goals so you don’t spend more than you can afford to repay. And if you share expenses with someone else, make sure you both have access to the budget and hold each other accountable,” the article continues.

The next tip is to “build a good credit score.”

“Establishing a good credit score is key to qualifying for the best financial products, like credit cards and loans. Plus, the higher your credit score, the better terms you’ll receive, which can save you thousands of dollars in interest in the long run (we always recommend you pay your balance on time and in full each month),” the article explains.

If you get a credit card, “the easiest way to improve your credit score is to use the card, be mindful to spend within your means, make sure you pay at least the minimum on time every month and pay it in full when possible,” CNBC Select suggests.

Tip number three is to build up an emergency fund, for unexpected expenses like car repairs, the article notes. “The money in your emergency fund can help you avoid taking out a loan or carrying a balance on a credit card, which can save you money on interest charges,” the article adds.

Your emergency fund should be in a “high yield savings account,” and experts recommend building it up to cover “three to six months of expenses.” Start small but build it steadily, the article suggests. “Saving $20 a week (roughly $3 a day) adds up to $1,000 in a year, which is a good cushion to get you started,” the article continues.

The next tip is to save for retirement.

“It’s never too soon to start saving for retirement, and the earlier you start putting money toward your future, the more it can grow,” the article begins. If your employer offers any kind of retirement savings program, be sure to sign up and contribute to the max, the article continues. Otherwise, you can save on your own – here in Canada, you can contribute to a registered retirement savings plan, a Tax Free Savings Account, and (of course) the Saskatchewan Pension Plan, a voluntary defined contribution plan.

Pay off your debt, the article advises – if you have “student loan or credit card debt, you should make paying it off a priority in your 20s.” Carrying debt, the article says, not only can lower your credit score and make it harder to borrow money, but it will cost you “a lot of money in interest charges the longer you carry the debt.”

Finally, the article concludes by recommending we develop “good money habits,” such as regularly reviewing your money situation, avoiding high fee banking, and “spending within your means.”

This is a nice overview and makes sense for older people as well as young.

If, as the article suggests, you want to start saving on your own for retirement, the SPP may be of interest. It’s a government-run, not-for-profit plan, so the fees are low – less than one per cent. SPP takes the money you contribute (which you get a tax deduction for), invests and grows it in a professionally managed pooled fund, and then will turn it into retirement income for the future you. Options include a lifetime monthly annuity payment or the more flexible Variable Benefit.

Get SPP working for you!

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CNBC

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