By Chaz Gaines
Every individual has different goals and unique circumstances that help to guide the decisions they make when it comes to their savings strategy. Some people have decades of work ahead of them to steadily sock away money for retirement, while others are looking to gain ground quickly with retirement just a year or two away. Some individuals have large families with children to send off to college, while others are responsible for only themselves.
In the Savings Spotlight series, we’ll take a look at some of the big benchmark moments throughout life. We’ll look at how teens, recent graduates, young families, and those closer to retirement all have varying needs that require a different savings approach.
In Part 1, we’ll provide some savings advice for teenagers who are first-time savers. Just because they’re young, it doesn’t mean that their summer jobs or weekly allowances can’t help them to begin building a robust portfolio to maximize their savings now. If you’re a teen, or have a teen, who is just starting to learn about saving money, here are a few tips to get them started.
Distinguish between short, medium, and long term savings
It’s important for kids to be kids, while also learning fiscal responsibility. As such, there’s nothing wrong with a teen wanting to save up for a concert or snowboard at the same time they’re saving for college, or even retirement. It’s simply about making a clear distinction and sticking to your plan.
Putting savings strategies into context
When it comes to long term saving, it is easy for teens to be too reactionary. For instance, a minor stock market correction could seem like the next Great Depression if you don’t have the benefit and wisdom that comes with watching such fluctuations occur for decades. Teens must remember that, depending on the investment vehicle, the money they set aside today may not be used again for another half century. As such, it’s best to set a strategy and stick to it, rather than continually pull your money in and out of savings to try and time the markets.
Thinking about risk and reward
Risk and reward are inherent in any investment. Finding the most optimal vehicle for your needs is all about striking the right balance between risk and reward. Young investors don’t typically have the assets to make a lot of risky investments. But conversely, they’ve got lots more time to make up ground if a high risk-high reward investment doesn’t pan out. Young investors are in a unique opportunity to use their age to their advantage, but you must assess your risk tolerance carefully first.
Never too young for life insurance
While teenagers might think they’re immortal, certain types of life insurance can offer significant savings upside for teens. Whole or permanent life insurance contracts provide additional savings components, as they accrue cash value when you make premium payments. And because age and health are critical elements in determining the premium costs of a life insurance contract, the younger you are when you lock in your rates with a permanent plan, the cheaper it will be and the earlier you’ll start saving. Not only will you protect yourself and your future family later in life, but you’ll have a big leg up on your cash value investment too.
At The Milford Bank, we have helped countless members of the Milford and Stratford community develop successful savings strategies for their wants and needs. No matter where you might be with your own personal savings strategy, we can help. Stop by any Milford or Stratford location near you, or check out our Online Learning Center to learn more.
And be sure to stay tuned for Part 2 of this series, when we’ll be highlighting savings strategies for recent graduates.