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No Savings? You’re Doing Something Wrong. This is Why Saving Money in Your 20s is Essential.

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September 18, 2015 · 2.9k Views

Recently, a blog post on Elite Daily entitled “If You Have Savings in Your 20’s, You’re Doing Something Wrong,” has been generating a lot of buzz across social media. In the article, author Lauren Martin dispenses the financial advice to not worry about saving money as a young person, instead “spend money on memorable nights out and enjoy your life.” Admittedly, Elite Daily is not the most reputable source for financial wisdom, but the post has amassed over 35,000 social shares in less than two days. At first glance I dismissed this as some sort of media ploy to get attention, but unfortunately based upon the social shares and numerous comments it’s not that clear cut. Martin is currently in her 20’s, a member of the millennial generation, yet is trying to speak like she has a lifetime of experience under her belt.

Wherever you fall in this debate, it’s something that everyone needs to become aware of. There are numerous reasons why this type of mindset is silly, but this thinking is far from uncommon in this generation.

Based on recent studies conducted, only 56% of 18-34 year old’s save at least 5% of their income, and only 29% of Americans have any emergency savings at all. Of course there are those who are living paycheck to paycheck and may not have the means to be able to save, but there’s certainly a large percentage of people who don’t place a high enough level of importance on saving money.

Here are some main lessons to be learned from the numerous flaws in Martin’s mindset:

1. Saving money doesn’t mean a lack of enjoyment in life.

One of Martin’s main principles is that if you’re saving money, you’re not getting enjoyment out of life. Having a savings account doesn’t mean you never have fun times, or can’t treat yourself, it means you’re being responsible and living within your means. It’s not deprivation, it’s making strategic choices so that you aren’t spending more than you make, which is one of the most important rules of personal finance. There are plenty of enjoyable and memorable experiences to be had on a budget.

2. Having a savings account is taking a long-term outlook on life.

Our culture is too fixated upon instant gratification. It’s not realistic to think that no emergencies or unexpected expenses will pop up, which is why it’s essential to prepare yourself for them.

3. “Wants” will always exceed your income level.

Constantly feeling the need to spend more money is a dangerous mindset to have. There are plenty of athletes and celebrities who made millions throughout their careers, only to declare bankruptcy later on due to poor spending habits and a lack of financial planning. This concept of “lifestyle inflation,” spending more when you start making more, is one of the main reasons people get stuck in the paycheck to paycheck lifestyle and are unable to reach their financial goals.

4. Irresponsible spending leads to debt.

Indulging all the time rather than consciously choosing to live within your means is one of the quickest ways to poverty. If you’re spending everything that you make, when those unexpected expense do pop up, you’ll be stuck scrambling and forced to put them on a credit card.

5. More spending does not equal more happiness.

Spending more money does not mean you will be happier or more fulfilled. A Princeton study found that after a $75,000 salary, emotional well being did not rise significantly with annual income.

“This pressure, this third-party stress, is ingrained within us. But like most things our parents have ingrained in us, we must consciously work to push it out. Because while they may have the best intentions, they don’t always have the best insight. They want us to save because it provides us with a safety net, but that’s exactly why we shouldn’t. We’re not trying to live with safety nets; we’re trying to live on the edge.”

It’s extremely unfortunate that Martin considers everything that her parents taught her to be worthless. It’s also extremely arrogant to assume to know everything and think there’s nothing to be gained from elders with more life experience. They want you to save so you don’t end up sleeping on their couch if something unexpected comes up!

“They were getting married at 20 while we’re just getting our first apartments. They were saving for kids while we still want to be kids. We’re on different schedules, different paths and totally different savings plans.”

Times are certainly different from what they used to be. More people are waiting longer to get married and have kids, but the outlook in this quote sounds like someone stuck in the world of “Peter Pan,” never wanting to grow up and accept life’s responsibilities.

“Refusing to give yourself the luxury of enjoying your money negates the whole point of making it.”

The point of making money is to be able to pay your living expenses, and eventually be able to retire. Of course it’s nice to indulge in some luxury along the way, but that is far from the sole priority of making money.

“People who are saving in their 20s are people who don’t set their sights high. They’ve already dropped out of the game and settled for the minor leagues. Your 20s are not the time to save; they’re the time to gamble. $200 a month isn’t going to make the dent that a $60,000 pay raise will after spending all those nights out networking. When you’re 40, you’re not going to look back on your 20s and be grateful for the few thousand you saved. You’re going to be full of regret.”

Savers may not have their head in the clouds, but having a long-term outlook with your money is never a bad thing. It’s not settling, it’s about setting goals and taking the steps necessary to work towards those goals. The $200 a month could actually make a HUGE dent in bringing you closer to financial independence and allowing you to retire at a reasonable age. By investing $200 a month, figuring for an average return of 7%, compounded annually, your total would be over $105,000 by the time you reach your 40’s. By your 60’s? You’d have almost $515,000. I’ll take the sure thing of investing with compound interest, over gambling with drunken nights “networking” any day. Spending all night at the club, blowing money, and showing up to work hungover is also not the way to achieving this “$60,000 raise.” Waiting to start saving until your 30’s, or longer, means potentially losing out on hundreds of thousands of dollars. Plus, once that time is lost, there’s no quick fix to get it back.

“This isn’t the time to safeguard — it’s the time to bet all your chips and hope to make it big.”

….and if things don’t go exactly according to “plan?” You’re likely looking at having to put your expenses on a high-interest credit card, racking up more debt and further squandering the ability to reach financial independence.

“Everything works out, and if you’re smart, able and had a job once, you’ll have one again. Don’t waste your youth worrying about expenses when you should be worrying about experiences.”

It’s ignorant to assume that “if you had a job once, you’ll have one again.” Life happens. Lay-offs, unexpected illness, etc. Having this false sense of invincibility is not a responsible way to handle finances.

Overall, there are many flaws in this line of thinking. She’s decided to take an ignorant and short term “live it up” approach, without any acknowledgement of the potential consequences. Additionally, spreading this type of misinformed advice to other millennials is irresponsible. Going clubbing all the time and blowing your entire net worth isn’t “living it up” or “living on the edge,” it’s stupid. Accept the responsibility of preparing for your future. Life doesn’t stop as soon as you turn 30. Setting some money aside in a 401k and a savings account are ways to become more financially independent, get out of debt, prepare for unexpected expenses, and ultimately lead a life of more peace and less unnecessary risk.

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A lifelong Bay Area native, Matt Spillar graduated in 2013 from Fresno State with a Sports Marketing degree. He strives to combine his passion for sports marketing along with his interests in finance and budgeting. In his spare time, he writes for his personal blog, spillsspot.com

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