It's Time For Generation Y to Get Acquainted with Savings Accounts

Generation Y: Why Wait to Start a Savings Account?

Generation Y is dragging its feet when it comes to saving money. This is not youthful rebellion--it's repeating the same mistake that too many baby boomers and Generation Xers made before them. Still, Generation Y has the best shot at learning from those mistakes by getting on the savings track.

A recent survey by the National Foundation for Credit Counseling found that 45% of Generation Y respondents had no savings. This definition of Generation Y covers people born between the years of 1977 and 1994--or people who will turn anywhere from 15 to 32 this year. Just about anyone in that age grouping should at least have a savings account with a little money set aside, and most are old enough to be thinking about a long-term savings plan.

Reasons for Savings

Perhaps the problem is that when people mention building up savings, they usually do it in the context of saving for retirement. It's hard to make the concept of retirement meaningful to a 22-year-old. The fact is, though, that retirement is only the last in a series of financial goals that are spread throughout all stages of life.

Here are some reasons why even the youngest members of Generation Y may want to start feeding their saving accounts:

• Your first car. If the youngest members of Generation Y are around 15, it's time for them to start dreaming about getting a driver's license and a car. Better start saving if you want that dream to be a reality--cars are not only expensive to buy, they require maintenance, repairs, and insurance. Putting money into a savings account rather than that shoebox in your closet will allow you to earn some savings account interest along the way--enough, at least, for a couple of extra tanks of gas.
• College. Even if you have some financial help, you'll find that going to college is an expensive proposition. Building up a cushion in your savings account will give you more flexibility in your choices, whether it be which college you attend or how much to spend on clothes.
• An emergency fund. Once you're out of school and on your own, it's time to build up a little emergency fund. Sure, you may be getting by on your salary, but unexpected expenses have a way of cropping up. And most people don't spend exactly what they make--they are either saving money or building up debt. Better to be earning savings account interest than paying credit card interest.
• Buying a home. Credit is tighter than it was a few years ago. When members of Generation Y go to buy a first home, they'd better count on bringing a healthy down payment.
• Retirement. Yes, this seems far in the distance for Generation Y, but think about this: the Social Security Trust Fund is projected to be tapped out by the time you are eligible to start drawing from it. If you don't start funding your retirement, who will?

In short, building up a savings account does not only serve some far-distant goal. It helps you meet a continual sequence of life goals along the way to retirement. For even the youngest members of Generation Y, that sequence starts now.

Source:

Christina Burton • Generation Y needs crash course on retirement plan • Aug 17, 2009 • Pittsburgh Tribune Review • http://www.pittsburghlive.com/x/pittsburghtrib/business/s_638581.html