The savings advice “pay yourself first” is important—but what does it mean? It means that when you get any money (such as your pay or cash gifts), you should put some of it in your savings account before you pay your bills. There are many reasons to do this. You can:
- Save money toward your goals
- Learn to manage money better
- Have money for emergencies
- Improve your standard of living
Perhaps not all of these reasons matter to you today. Right now you might just be focused on learning to manage your money and saving for some of your goals. As you grow older and change, though, your responsibilities will change and increase. Soon enough you’ll need to save for emergencies and improve your standard of living.
Present and Future Savings GoalsWhat do you want to save money for? Your answer to that question will identify your savings goals. Right now you might be working part-time after school to save money for college expenses or for a car.
When you’re older, you’ll likely save money for some of these major expenses:
- Unexpected events, such as job loss, car repair, or unexpected medical bills
Time is on Your SideYou’re young, so get in the habit of paying yourself first now. Time and compound interest will work for you and help your savings increase.
Another advantage to start paying yourself first now is that you have access to people who can give you free advice about saving. Your parents can get you started on the right path—and help you if you make a mistake.