It’s much easier to save money when you have a clear goal in mind. For example, if you’re currently 20 and want to have $100,000 saved by the time you turn 30, you’ll need to save around $755 per month with a two per cent annual rate of return.
So when it comes to setting your savings plan, start with the figure you want to have saved when you turn 30. Then work backwards to set the monthly amount you’ll need to save to achieve that goal. This will give you a clear roadmap to success, and provide a simple and effective way to monitor your savings performance each month.
While the 50/30/20 rule is a good starting point, you can never save too much. Try reducing the amount you spend on your ‘wants,’ and redirect that money into your savings. Going without that pair of designer jeans or handbag may hurt in the short-term, but achieving long-term financial freedom will be worth it.
If you can aim for a 50/25/25 savings plan, or even a 50/20/30 plan, the extra money you save in your 20s will provide a strong foundation for investing in your 30s as you build towards genuine mid-life wealth.
Your savings have the ability to generate interest. This is known as your rate of return and has a significant impact on your ability to build your wealth over time. One way to maximise your rate of return is to open a savings account with a high interest rate. For example, Standard Chartered Bank’s JumpStart account offers up to 2.5% p.a. interest on your first $50,000 deposited, and an e$aver account offers bonus interest in incremental payments.
Repaying debts like student loans can feel like a pain in your 20s, but clearing your debt as quickly as possible will free up more of your income to divert into your savings account. That means rather than paying interest to your lender, you’ll be earning interest from your bank.
If you’re only paying the minimum monthly repayment on your loan, try to cut your spending so you can increase your repayment amount. Likewise, if you’re paying off one or more credit card debts at a high interest rate, consider refinancing with a single personal loan at a lower interest rate.
Adding a secondary revenue stream to your income is an excellent way to boost your savings. Put the extra earnings straight into your savings account to take advantage of a high interest rate.
Many people are finding ways to monetize their passion these days. These include starting a YouTube channel, building a social media following, selling hand-crafted items, even self-publishing a book. The possibilities are endless and all it takes is a bit of effort to make it happen.
Achieving financial freedom doesn’t happen by accident. You need to put an effective savings plan in place and stick to it. Getting started in your 20s will put you well ahead of the game by the time you turn 30.
Want to save better? Get your savings off to an excellent start with a Standard Chartered Bank JumpStart account.
This article is brought to you by Standard Chartered Bank (Singapore) Limited. All information provided is for informational purposes only.