Disclosure: this post features description of financial products that are, in our own opinion, easy steps for our readers to grow their personal savings. Any investment carries risk and Millennial Reboot is not compensated by the companies featured in this post.
While talking with many of you, casually or during coaching sessions, I keep seeing a common theme that many millennials are saving too little*, and even more are turned off by what they think is the monster task that is “investing”. Having witnessed the worst stock market collapse since the Great Depression can certainly bring a negative perception to investing. I get it. But it’s not 2008 and there are a ton of new tools to not only trick yourself into saving more but also supercharge your money and ensure a bright financial future.
If you have a goal in your head to be financially independent by a certain age, want to buy or upgrade a home, or maybe even stop working one day, today is your day to start**.
Even if you’re not great at making a budget, that’s fine for now, the below will force you into it. Make saving automatic, “set it, and forget it”.
If you remember the Ronco Showtime Rotisserie from the 2000’s, American inventor and marketing personality, Ron Popeli, made a fortune by showing people how to automate dinner, just “set it, and forget it”. The point is, things that are a pain in the ass, like cooking a juicy chicken dinner, are much easier when they are automatic.
..and now I’m hungry.
When asked what is the best way to invest, save, or get to a particular financial goal, the answer I always go back to, is simply to “set it, and forget it”.
Four ways to automate and supercharge your savings:
1. Take advantage of work-sponsored retirement programs:
401k, IRA, ROTH IRA, all the stupid sounding named things that you probably get an email at work about once a year. This should be the first and easiest step of automatic investing.
If you have confusion on your work’s retirement programs, it’s ok to ask your Human Resources department questions to help get you there. You may even have some trusted collogues that can help around the office as well. The one key, make sure you’re taking advantage of any “match” programs available. An example: a company may match your retirement account savings up to 5%, so if you’re not putting in at least 5% a paycheck (typically tax-free) you’re leaving free money on the table. Literally. Free. Money.
“Set it”: Once you’ve enrolled with your company, funds will go into your savings account automatically at every paycheck. Typically, you should increase your percentage of savings every year if your financial situation allows.
2. “High interest” savings accounts:
Full disclosure, I personally hate these because an interest rate of around 1% is not what I would consider “high”. But, they are safe and insurance from any market turbulence, and particularly great as an emergency fund only. Check out Capital One Bank or look at your own bank for what is typically called a “high-yield savings account”.
“Set it”: Set your account to automatically process an amount you feel conformable with to build or maintain an emergency savings fund. This is available on most, if not all bank websites.
3. Found money programs:
Financial companies like Acorns and most large banks offer programs like “keep the change”, which takes every purchase you make, rounds up to the nearest dollar amount, and saves the amount in-between. An example: if your coffee in the morning is $3.25, these programs round up your purchase to $4.00 and automatically save $.75 to your account.
Acorns is particularly useful because it automatically invests your spare change from your daily transactions and into a low-fee, balanced stock fund vs. the less-than-1% interest typical bank account.
“Set it”: sign up and attach your most used credit (or debit) cards and watch your savings grow without taking another step
These are one of my favorite financial automation tools. The accounts automatically build and manage a low-fee diversified investment portfolio, which means, you’re
“in the market” without the intimidation. Services like Wealthfront and Betterment will ask questions to determine your level of risk tolerance and diversify the account for you. It’s similar to having your own personal investment adviser, but, you know, a robot.
“Set it”: Set your checking account to add funds on a weekly, bi-weekly, or monthly schedule and the Robo-Funds will disperse the funds across a number of funds within your account.
“..And forget it”
Here’s where a little self-discipline needs to kick in. Every month, you may see your balance grow, shrink, or do a combination of both based on someone’s tweet. Just like your parents told you growing up, probably while standing in that expensive-ass glassware section in the middle of a Bed Bath and Beyond for no reason, section; “look but don’t touch”.
Keeping a regular eye on certain savings methods can be good and bad. For some people, it’s best to review 401k or investment funds only once a year to keep on track and limit the temptation of shiny new, unnecessary objects. If you’re intimidated by investing, that’s ok, it’s a complicated business. Using some of the tools above can help, but the best thing you can do is automate your savings: “set and forget it”.
*”too little” carries a different weight for every individual. Make sure your financial goals and actual dollars saved per month are balanced correctly and you’re good to go!
**if you have access to a time traveling DeLorean, please feel free to start saving whenever you wish. Also, please email next week’s lottery numbers to firstname.lastname@example.org. Otherwise, today is your day to start saving.