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Young Savers

You know that it takes money to achieve your dreams. What you don’t always hear is how saving money can make the difference between reaching your goals or not. The good news is you can start today and be on track for all the great things you desire!

While saving money might not sound like something you need to think about now, it’s actually the perfect time to start. One truth you’ll learn in this section is that the more time you have to save, the more you’ll have for your goals. At ESL, we’re here to help you create the best opportunity to save now and stay on track for a bright future.

Things to know:

  • Save money for now and the future.
  • Create specific goals to keep yourself on track with your money.
  • A college education pays off in the long run—save now to be prepared.
  • If you save $200 each month in an IRA until you retire, it could grow to over $1,000,000.
  • For Goals

    When you think of saving money, you might think about a time when you’re much older. The truth is you need to think about saving now! You have needs, wants, and goals just like everyone else. You want to buy clothes, a new computer, phone, car, and prepare for college. Of course you also want to buy video games, go to the movies, and have fun with your friends! That’s okay. The trick is finding the right balance so you can save enough to have the things that really matter to you. 

    Here’s a simple plan to save for the things that are important to you:

    Steps
    Example
    StepsFirst, figure out how much it’s going to take to get what you want.
    ExampleFirst car = $2,500
    StepsSecond, figure out how long you have to save.
    Example“I want it now, but it’s something that will probably take about a year.”
    StepsThird, divide the amount by the length of time.
    Example$2,500 divided by 12 months = $210 (rounded up)
    StepsFourth, figure out how much would need to be saved each time you get paid.
    Example$210 divided by two paychecks each month = $105
    StepsFifth, open up a savings account and use direct deposit.
    Example$105 x 24 paychecks = $2,520

    Here are a few things to consider about opening a savings account for your goals:

    • ESL offers savings accounts to help you reach your goals that you can open at any age.
    • You may have to have a parent or guardian open a “custodial savings account” if you are under age 18.
    • Direct deposit is the best way to save consistently. This means that money from your paycheck is transferred electronically to your savings account. Most employers offer this option.

    Check out the Reaching Your Financial Goals Worksheet for an easy way to write out your goals.

     
  • For College

    Education can only brighten your future. Higher education can open the door to a world of opportunity. You know that it’s going to take money to go to college—a lot of money! In recent years, the cost of attending a public university has risen nearly 51%! And there are a lot of expenses with going to college other than tuition—books, supplies, food, clothes, entertainment, etc.

    Paying for the “Little” Expenses

    Most pay for college with a combination of sources—grants, scholarships, student loans, and saving (visit Saving and Paying for College to learn more). Some students use loans to pay for personal expenses such as laptops, phones, books, etc., not knowing this significantly increases the cost of these items. What’s also important to know is that all the money you borrow for your college expenses has to be paid back at some point. So, the less you can borrow the better. That’s why saving a little to pay for these items makes a big difference. The earlier you start the better!

    For example:

    Miscellaneous Monthly College expenses
    Paid for With a Financial Aid Loan
    Paid for With Savings
    Miscellaneous college expensesLaptop = $1,000
    Cell phone = $200
    Supplies = $200
    Books = $1,000
    Total = $2,400
    Paid for with a financial aid loan$2,400 loan for 10 years
    5% interest
    120 months x $25.46 = $3,055.20
    Paid for with savings$2,400 saved over three years in a savings account
    36 months x $67 = $2,400.00

    Use this Student Budget calculator to calculate how much you will save for your goals.

    If saving is the difference maker early on in the college planning game, then the big question is “Where’s the best place to save?” We’re glad you asked. Here are some places you can start:

    • 529 Plan: Good for tuition and miscellaneous expenses.

    Take a look at College Savings Plans for an in-depth look at college savings plans.

     
  • For Your Future

    We all want to have a lot of money. That’s not a bad thing. Being wealthy gives us the ability to accomplish the great things we want to do in life—buy a home, have a nice car, travel the world, and have freedom! Understandably, it can be difficult to imagine how to become wealthy other than winning the lottery, becoming a professional athlete, or making it as a famous actor or musician. In reality, most millionaires didn’t become wealthy by being famous or winning the lottery. Most millionaires got to where they are by a common path—they saved!

    The good news is, you have a major advantage … you’re young! Having more time to save always means more potential to become wealthy!

    Here’s an example of how it might work:

    • You work part-time for 800 hours each year (16 hours a week) for four years while you’re in school.
    • You earn at least $8.75 (NYS minimum wage 1/2015) per hour = $560 per month.
    • You save at least $200 each month in an Individual Retirement Account (IRA) for your future. The rest is used for your other priorities.
    • All together, you will have set aside $9,600.
    • If that’s all you save and leave it untouched, at retirement, that $9,600 could grow to over $300,000!
    • If you continue to contribute $200 each month from now until you retire, it could grow to over $1,000,000!
    • Try it yourself with the Millionaire Calculator.

    When it comes to saving for your future, you have to know the right place to save. That’s where an IRA (Individual Retirement Account) comes in.

    Here are some quick tips on IRAs:

    • You can open an IRA at any age as long as you have regular income—money from a job.
    • Money grows a lot more in an IRA than a regular savings account.
    • You can’t take money out of an IRA like you can with a regular savings account.
    • It’s important to learn some basics before opening an IRA. Visit Saving for Retirement to increase your knowledge.
    • Learn more about IRAs that ESL offers.

    For a very in-depth look at saving for your future, read the Retirement Planning Guide.