Be Young, Be Frugal

I was pretty young when I got serious about saving money and being more frugal. I didn’t do it with some grand notion of preparing for my old age or anything, I just wanted more money for emergencies and to give me more choices in terms of where I might live and work. Looking back, though, I understand now why starting young was the smartest thing I could do.

Too many people put off saving, thinking, “I’ll save when I’m making more money, or when the kids are gone, or when I’m older and I’ve had all my fun.” The problem is that saving when you’re older becomes a dicier proposition as the years go by. Yes, you may be making more money but you’ll also likely have more demands on your money. You may get sick and become unable to work. Or, you may have to start paying people to do the things you used to do. Saving when you’re young gives you a cash reserve that you can draw on as you age and, thanks to compounding, means that you don’t have to save as much as you get older to reach your target. Here are the top reasons to save while you’re young and not put it off until “someday.”

Compound Interest

This is the most obvious reason to save while you’re young. When you save in interest-bearing accounts, your interest compounds the longer you leave the money in there. If you put ten dollars into an account earning three percent interest per month, you’ll have $10.30 at months’ end. The next month, you’ll have earned thirty-one cents in interest, bringing your total to $10.61. Even if you don’t add to the account, you continue to make money every month. The more months and years you save money and leave it alone, the more interest you will earn. Obviously this example won’t amount to much but if you’re dealing with thousands of dollars, an extra year’s or five year’s worth of interest will add up. The younger you are when you start to save, the more time your money has to grow.

As You Get Older, Things Become Harder To Do On Your Own

In your twenties and thirties, it’s nothing for you to mow your own grass, refinish your own floors, keep a garden, or paint your own house. You can save thousands by doing many chores yourself if you’re frugal. When you get older, it gets harder to do those things yourself. You may want to be frugal, but it just isn’t possible. Aches and pains may make installing a new floor impossible. Arthritic hands may mean that you can’t clutch a paintbrush for hours. You don’t even have to be elderly for these things to happen. As early as your forties you may begin to feel aches and pains that make routine chores uncomfortable. When it happens, you end up paying someone to do these things for you which will eat into any money that you’re able to save. If you’ve always thought, “I’ll save when I’m older,” you may instead find yourself paying more to have more things done for you.

Money Gets Tighter As You Get Older

If you’re fortunate your income will go up as you get older. Unfortunately, the demands on your money are likely to go up, too. You might have kids and college expenses, aging parents that require assistance, increasing healthcare expenses (even if you have great insurance), and you might want things like a bigger house or a nicer car. All of these demands on your money will eat into what you can save. You might have a big income but find your savings rate going down instead of up. If you’re also now trying to save aggressively for retirement, you might find that the money just isn’t there.

Things Get More Unpredictable As You Age

While the unexpected can happen when you’re young, it seems to happen more often as you age, simply because you have more in your life that can go wrong. Kids can get sick. A spouse can get into an accident. You can lose your job and then a month later your spouse can lose hers. You have to go back to school before you can get a new job. You can have an illness or that family history of heart disease catches up with you sooner than you planned. I don’t say this to be all doom and gloom, but the fact is that these types of accidents, injuries, and illnesses can put a serious strain on your finances. It may mean that, not only can you not continue to save, you have to dig into money you’ve already saved. You may be making a great salary but find that none of it can go into savings. If you save more when you’re young and you only have to think about yourself, you can find yourself in a better position to weather the unpredictability of later life.

Your Responses To Unpredictability Are More Limited

If you lose a job when you’re young and unencumbered, you can move more easily or take more risks to find new work. You can also cut your spending drastically, since you only have to care for yourself. When you’re older with a house and kids in school, it’s not as easy to up and move for a better job or more prospects, or to cut your spending to the bone. Unemployment insurance might be enough to see you through when you’re young whereas when you’re older with a family to support and maybe higher medical costs, it won’t be enough. If you get sick or have an accident when you’re young, you might be able to get by on Social Security or move in with family or friends to decrease your expenses. When you’re older, those responses aren’t practical or helpful. You need more money saved when you’re older to handle life’s curveballs because your other responses are going to be limited. If you saved when you were young, you’ll have it. If not, life could get a lot harder.

It’s best to put as much money away as you can when you’re young so it will be there if you need it. If you can keep saving as you age, great, but if you can’t at least you’ll have that cushion you amassed in your younger years to fall back on.

(Photo courtesy of alamosbasement)