Editorial Policy

How Aggressively Do you Save?

Kristin McGrath

November 30, 2012

How’s this for inspiration?

Yvonne Reed is 29 years old and already has $50,000 saved in her 401(k), according to this Reuters story. That could translate to at least $4 million when she retires, assuming she does so at age 70. And then there’s Katie Vojtko, who is diligently contributing $5,000 a year to her Roth IRA.

While Generation Y is often known for its student loan and unemployment struggles, some interesting data from Merrill Edge paints a more positive picture. Generation Y is looking to the future with worry — but with a plan to save for it.

Gen Y is the most worried group when it comes to thinking about its financial future, according to the Fall 2012 report, which surveyed about 1,000 respondents with investable assets. Eighty-three percent are concerned that the economy will inhibit their ability to meet financial goals (compared with a national average of 75 percent). Meanwhile, 84 percent of Gen Y-ers are seeking financial planning advice, compared with a 76 percent national average — which indicates that the economy’s struggles may be spurring this age group into action.

That willingness to take action could make all the difference, the Reuters article points out, as even a little bit set aside when the saver is 25 can grow into a big retirement nest egg.

My saving habits aren’t nearly as impressive as those of Reed or Vojtko. But they’ve gotten a bit more aggressive since I met with a financial adviser earlier this year. Instead of letting much of my money waste away in a checking account, I’ve adopted a “spill-over” method. I keep my checking account balance quite low — enough to cover living expenses and not much else. Once the balance hits a certain point, the extra gets transferred to an emergency savings account that earns some interest. Once that account gets above a certain level, I siphon off little bits at a time toward my Roth IRA and an investment account that (for good reason) isn’t easy to withdraw funds from. This method prevents my liquid money from reaching a balance that might tempt me to buy things I don’t need.

And, then, there’s my 401(k), which is slowly, but steadily growing. Today, in honor of Yvonne and Katie, I bumped my contribution up a tiny bit.

With forward-thinking savings habits in mind, here are some of what I found to be the most interesting personal finance blog posts this week.

Young Cheap Living explains how to live on less than $25,000 a year.

Consumerism Commentary investigates the danger of toxic financial attitudes.

Dinks Finance suggests a few financial lessons you can learn from children.

Wealth Pilgrim offers a guide for those who got a late start on saving for retirement.

Squirrelers lists six examples of when frugality goes too far.

Financial Uproar explores how consuming destroys wealth.