If you’re a millenial, odds are you’re not ready for a rainy day.
According to a new survey of 2,200 US adults conducted by Schwab’s Modern Wealth Survey, a dismal 39% of millenials say they have an emergency savings fund that can cover at least 3 months of living expenses if something unexpected comes up. That’s up from roughly 32% of millenials reporting that they had 3 months worth of emergency savings back in 2018.
What is more worrying, however, is the fact that 36% of those surveyed have no money whatsoever set aside for an unexpected expense.
That is problematic when you have no control over your finances and start racking up debt for unforeseen shortfalls like car repairs and medical emergencies. Credit industry expert Ted Rossman at CreditCards.com says that having an emergency savings fund is “a buffer between you and high-cost credit card debt.”
Saving money is not an insurmountable obstacle like many make it out to be. Here are some ways to help you begin building up that foundation to help you weather the storm of life’s unforeseen circumstances.
How To Start Saving: Starting From Zero
So these are the statistics: only 39% of millenials have some form of a safety net according to Schwab’s survey. A staggering two-thirds are living paycheck to paycheck.
If you find yourself in the latter group, it might seem impossible to save anything. Farnoosh Torabi, host of the “So Money” podcast, admits that there are limitations to your spending power when you have student loans, credit card debt, and monthly bills. Torabi concedes that “getting into the habit of saving is simple as long as you commit to a plan of saving a little at a time.”
Start by setting up a savings account with you bank. Then set up a regular, automatic transfer from your checking to your savings account. This could be something small, like $5 a week. The strategy is to have the money leave your hands before you are able to spend it. Over the course of time, that small weekly investment will accumulate bit by bit and that will motivate you to do even more.
How Your Social Circle Affects Your Savings
Torabi breaks it down that money management is part math and part mindset.
The people around you can affect your spending and saving habits just as much or even more so than your own efforts to save. “If you’re hanging out with people who are constantly spending money, constantly keeping up with the Joneses, guess what? That’s going to have a big impact on their bottom line as well,” Torabi explains.
It will probably be in your best interests to keep spendthrifts at arms length. Instead consider surrounding yourself with more frugal-minded people who will influence you to make financially-sound decisions.
The same goes for your social media networks. Half of millenials surveyed said that social media influenced a large amount of their financial spending decisions. And 48% said that they overspend when spending time with their friends, on dining out, nightlife experiences, as well as group vacations.
Torabi suggests that “if you find yourself going down rabbit holes on Instagram, make sure to mute the accounts that you know are bad influences on your financial habits.” A couple hashtags like #financialfreedom and #moneymotivation will also be good to follow to keep you on the right track. And remember, if you would like to talk to the experts, the Financial Helpers are only a phone call away.
