October 7, 2023

7 Financial Tips for Young Adults to Start Saving

Unfortunately, one of the things that most schools don’t teach students includes attaining better financial health. Some subjects mention the concept of insurance and investment, but how many discuss their details and emphasize their importance? As a result, many students graduate not knowing how to save, protect, and grow their money.
If you are a young adult who doesn’t know what to do financially in your 20s, start by learning more about financial health and the different ways to build your financial health and wealth. Specifically, here are seven financial tips for young adults to help you start saving today.
1. Learn to Make a Budget
One of the most significant money management tips for young adults is making a budget. Tracking your income and expenses allows you to check your current spending and foresee how much money you need on a monthly or weekly basis. Knowing where your money goes gives you a better understanding of your current finances and allows you to cut unnecessary spending.
When making a budget plan, start listing all your expenses, from necessary bills to your wants. Necessary expenses include rent, utility bills, groceries, phone bills, and transportation costs, among many others. Meanwhile, wants or discretionary expenses include cosmetics, eating out, new clothes, streaming services, and more.
After listing all your expenses, allot a budget for each spending based on your current spending. Prioritize your necessities and savings, and only make room for discretionary expenses if you have more money to spend. This method ensures that you have money to pay for necessities and still have savings.
If you don’t know how to make a budget plan, browse online to find free budget templates. Download or print a suitable template.
2. Invest in Your Health
One of the most important financial planning tips for young adults is investing in their health. Investing in your health not only includes eating healthy and staying fit but also ensuring you are covered during emergencies. It means getting health insurance in your 20s.
Health insurance helps cover your medical, dental, and surgical expenses when you need them most. It ensures that you can pay for medical emergencies without depleting your savings. Many employers provide health insurance plans as a benefits package for employees. However, most people often have to avail these plans from insurance providers.
Unfortunately, many Kenyans see health insurance as a waste of money due to the monthly premiums, which tend to be pricey. Many also don’t understand the concept and importance of having health insurance, so people don’t prioritize getting one. However, purchasing health insurance is one of the best financial decisions you can make today.
Get quotes from different insurance companies to find the best plans and rates for your health or life protection needs. Consider getting health insurance today, and thank yourself tomorrow.
3. Protect Your Wealth
As you start to work and build your wealth in your 20s, you will eventually gain savings and assets like a car and property. Moreover, you might also start a family. To protect your wealth, you must take steps to protect it. It includes getting insurance for life, property, and car, depending on your current assets. Life is unpredictable, and getting appropriate insurance for your wealth prepares you for the worst.
For example, getting disability income insurance protects your ability to earn in case of a sudden disability. This insurance provides a steady income if you can’t work due to an injury or illness. Meanwhile, getting car insurance covers car and medical expenses in case of an accident. Comprehensive car insurance plans can even cover expenses for damaged property or an injured third party.
Overall, the right insurance plan protects your hard-earned savings and assets. Although getting insurance means paying monthly premiums today, rest assured that these investments will not be a waste and will become a life-saver during unexpected events.
4. Create an Emergency Fund
Regardless of how much you earn and pay for daily expenses, bills, and debts, you should always have room for an emergency fund. As its name suggests, this fund is used for sudden expenses. Besides ensuring that you have enough money for emergencies, it keeps you from asking for money from others and getting into more debt.
How does an emergency fund differ from savings? The main difference lies in its purpose. Savings refers to the money you keep for a specific goal, like a car or vacation. Meanwhile, an emergency fund is a separate savings fund for unexpected situations, such as an accident, calamity, or job loss.
Many Kenyans combine both their savings and emergency fund. However, doing this might make you fall short in case of sudden expenses. For example, let’s say you finally saved up for a car and used your entire savings to buy it. However, you got into an accident a few days after, and you have no insurance to cover most of the expenses. Unfortunately, you have no savings left since you used all of it to buy a car.
Separating your savings and emergency fund guarantees that you have money left in case of emergencies. It also ensures that unexpected expenses won’t affect your short-term goals. So, if you have a budget plan, prioritize saving for an emergency fund as well.
5. Start Saving for Retirement
Starting to save for retirement in your 20s seems too early. After all, retirement is still a few decades away, right? However, you will be surprised how time flies. Moreover, saving for retirement isn’t merely a form of savings. Think of it as wealth accumulation.
You may not be earning a lot of money in your 20s, but saving over a long period makes a significant difference. Let’s say you are 21 years old and have started to save Ksh 1,000 every month for your retirement. That’s Ksh 12,000 in a year. By age 60, your retirement savings will total Ksh 468,000. If you save it in a bank or avail of a retirement plan, this can compound over time and reach over a million shillings, depending on the return rate.
Company-sponsored retirement plans are the best option. However, if you don’t have one, you can easily set up a retirement plan from a wide range of options. Overall, the most important thing is to start today to reap its maximum benefits in the future.
6. Resist Spending More Than You Need
Saving also means living within your means. Now that online shopping platforms make it easy to browse and buy items with just a click, many young adults spend more than what they earn. A 2019 survey by Schwab, a multinational financial services company, found that 49% of millennials spend money due to social media influences, while 48% overspend to participate in experiences with friends.
One of the most important money management tips for young adults is to learn how to control your spending. No matter how much money you save, it will all go to waste if you don’t know how to spend it properly. While you are still young, understand the value of money and saving, and discipline yourself when it comes to spending.
Some of the things you can do to control your spending habits include understanding your triggers, avoiding credit cards, sticking to cash, and tracking your expenses.
7. Start Building Good Financial Health at an Early Age
Learning to save at an early age ensures that you protect your finances during emergencies and build your wealth for the future. Aside from the commitment to save, one of the most important aspects of saving is time.
Saving now in your 20s and doing it continuously will make a big impact on your overall financial health. Overall, create a suitable financial plan for your lifestyle and you might learn how to be financially free in your 20s.

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