Laying the right foundation as you start your career is the key to future financial success, and at this life stage, TIME is your greatest asset. Consider that each dollar you save in your 20s can be worth ten times as much as one saved in your 40s. Through the magical power of compounding, the beginning of your working life is the prime time to start saving towards retirementóeven though many people donít want to think about, or worse yet, act on this principle.
During this time, young adults have the exciting task of learning how to manage the spending and saving of their money within the constraints of their income. Here are some steps to take now to put your financial future on track:
Your short term goals of less than five years might encompass a wedding, honeymoon, furniture or a new car. Medium term goals could include the purchase of a home and financing your future childrenís college education, followed by long-term retirement goals. These goals will help you determine how to spend and save your money.
It may be wise to invest in CDs or money market funds for your short term goals and the stock market for your longer term goals. Historically, the stock market has outperformed other types of investments over comparable time periods, but itís not for the faint of heart. You may also want to join a 401K plan if available from your employer or open up an IRA account.
CBT Bank can help compound your savings with an account thatís right for you:
A good guide is to save three to six months worth of living expenses to cover rent or house payments, utilities, car payments, food, transportation and insurance into a separate bank account that could be easily accessed in the case of job loss or uncovered medical expenses. Donít use the money for anything else.
CBT Bank recommends these accounts for the establishment of your emergency fund:
- Statement Savings
- Holiday or Savings Club
- Convenient Services Ė Conserve time, money and paper with CBT Bankís convenient online banking, online bill pay and e-statements. Youíll reduce the time it takes to pay your bills and save on the expenses of printed paper checks and postage while helping the environment as well.
Avoid high-interest credit cards and pay off your credit card debt monthly. Work with CBT Bank for your major lending needs including personal and vehicle loans, home mortgages and home equity lines of credit.
Your financial behavior over the past seven years, including how much credit you have, how long you've had it and whether you pay your bills on time is information included in your credit report. Three credit reporting agencies ó Equifax, TransUnion and Experian ó maintain these reports, and lenders buy them to help them decide whether to offer you a prequalification. Your credit report also carries your credit score ranked between 300 and 850 that many lenders use to decide whether you are creditworthy and will repay a loan. Your credit score can also influence the interest rate you pay. In many cases, the higher your score, the lower your interest rate. Your credit score is available from the three credit reporting agencies:
Visit our Financial Education section and learn how to:
Tips for Effective Financial Management
- Pay off your credit card debt. It is senseless to pay 13 Ė 20 percent interest on credit card payments while your savings accounts earn one or two percent.
- If you cannot pay off your credit card debt, pay more than the minimum payment each month which in some cases will only cover the interest charges.
- Donít worry too much about paying off student loans early. These normally have a much lower interest rate than credit cards. By making low payments on student loans, youíll have more money to reduce high-interest credit card debt.
For help determining the best practices and products for sound and productive money management during your Getting Started Life Stage, please contact us at 1-888-765-7551 or email us.