Example of Saving Money While You’re Young
7 September 2006CNNMoney regularly does profiles of people with various financial problems or accomplishments, and today they’ve got one on Jessica Nixon, a 23 year old who started saving when she was 16. The result is that she’s got about $50,000 put away for retirement now and is busily saving for a downpayment on a house. This is the payback on a strategy similar to the idea of working as a teenager and being able to retire on that money. If she’s got her money in stocks, she will - with $1.9 million dollars by my calculations, even if she puts no more money in and only earns 9%.
The bad? This sentence suggests she might not be saving all her money in the best investments:
After covering the rent for her one-bedroom apartment and all of her other day-to day expenses, she pours everything else into an online savings account where she earns around 5 percent interest and only transfers the money to her checking account as she needs it.
If she’s putting her money in there to earn 5 percent until she needs to spend it, then that’s smart. If she’s keeping all the extra money she saves towards retirement outside her 401(k) in a savings account, then that’s not so smart.
With this profile, though, most of it’s good. Like this:
And while that occupies a good portion of her free time, Nixon is also bolstering her resume, by working towards a masters’ degree in systems engineering at Southern Methodist University. But like most savvy savers, she’s doing it on someone else’s dime - her employer is picking up the tab.
If you can work that out, it’s always a great idea to let your current employer pay to boost your resume. And it’s surprisingly common. I get the feeling that most people just aren’t willing to ask - but I know several people who have gone into their employers with proposals to get an MBA or other degree at night and have gotten them approved. Sometimes they have to agree to stay for a certain period afterward or pay part of the costs - but it’s well worth it. The other thing that stood out as really smart was this:
By 2008, she hopes to at least double her $20,000 in short-term savings to cover a 20 percent down payment on a home and pay for a 17-foot runabout boat.
She’s saving up for something big she wants to buy! That used to be pretty standard, but today it’s so rare that it almost seems weird. You can buy anything on credit, and a boat is no exception. But instead of buying the stuff she wants every month and adding on more and more payments, she’s putting away the money and waiting until she has enough. And in the meantime, she’ll earn interest on the money. That’s a good basic personal finance lesson that everyone should keep in mind, especially once they get their finances to the ideal state of no credit card debt. Following that rule will help you keep it there.
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