Building towards short-term and long-term financial goals can be challenging for any generation, but Gen Z faces its own unique challenges. Increasing cost of living, stagnant wages, and economic uncertainty created by two different recessions have made it particularly difficult to save money. They are additionally likely to have higher student loans and housing costs than previous generations. These economic trends have made it more difficult for Gen Z to build savings, make major purchases such as homes and cars, and plan for retirement.
However, by following these tips, and with smart planning and decision-making, it is still possible to save money and have a healthy financial future.
Create a Budget and Stick to It
Developing a budget can feel a lot like starting a diet—we often think of it in terms of depriving ourselves of things we want and enjoy. Older generations love telling the younger ones that they are frivolous with their money, spending too much on Netflix and Starbucks and not putting it into a “rainy day” fund. But having healthy financial habits is about prioritizing your spending and thinking long-term, as opposed to what you “should” or “shouldn’t” buy.
Using a checking account is essential to maintaining a budget. Not only is this how you will pay bills and make purchases, but with convenient digital banking, you can easily itemize and track your expenses. In fact, there are a range of third-party budgeting apps that do this for you, providing you with weekly and monthly data on your spending habits that can help you adjust and stay within your budget.
Online bill pay is available through banks and credit unions and can help to consolidate your bills into one payment. This further helps reduce the time and effort spent tracking and calculating your monthly expenses.
Overwhelmed and unsure of how to start budgeting?
The 50/30/20 budget is the most common. 50% of your net income is spent on needs and debts (housing, groceries, student loans, car payments), 30% is spent on wants (Restaurants, entertainment, travel), and 20% is put into savings.
Another popular budget strategy is the “Pay Yourself First” method. Here, you deposit a set amount of money into your savings at the beginning of the month. This forces you to be more conscious of your spending habits and doesn’t run the risk of going over budget and cutting into your monthly savings.
Leverage Local Credit Unions
You also want to consider which financial institution you are using to build for your future. While it may seem easy to bank with a national chain that has name recognition, you may be better off banking with a local, member-owned credit union. St. Louis is home to several local credit unions that offer advantages to the big, national banks.
What makes a credit union a better choice than a big bank?
Credit unions are member-owned, which often translates to better deals for account holders, making them excellent options for starting your financial journey. They offer competitive rates on savings accounts, low fees, and personalized customer service. You’ll want to research credit unions before banking with one. Find one that includes traditional deposit accounts and loans, insurance products, and robust digital banking. Digital banking allows the convenience of managing your money from your phone or computer, making peer-to-peer payments, and setting up autopay for your bills. You’ll also want to find a credit union that offers digital and financial security to help keep your money and your identity safe.
Start Saving with Local High-Yield Accounts
When you’re looking for a local financial institution to bank with, you’ll want to find one that offers a variety of high-yield savings accounts. In addition to traditional savings accounts—which offer lower interest rates but flexibility in accessing your money—you may want to consider investing in a money market account or a CD. Both of these high-yield accounts have advantages and disadvantages, but they’re both generally higher-yield than traditional savings accounts.
If you don’t have a lot of money to put in your savings, don’t worry. Starting with even a small amount will lead to savings over time thanks to the compounding interest. And while you may utilize money market accounts or CDs to save for future goals or major purchases—such as buying a house or car, or for their education—you should also aim to build an emergency savings fund that can be accessed when needed. That “rainy day” fund? Well, you may end up needing it. Consider your budget and how much you can set aside each month for your emergency savings. Even a small amount will build into a safety net that gives you peace of mind.
Be Aware of Your Credit Score
Your credit score is a number that indicates to lenders both your credit history and risk. It’s important to understand both how to monitor your credit score as well as how it can be affected by various financial decisions in both short- and long-term ways.
Credit scores run from 300-850, and are generally categorized in the following ways:
- Poor: 300-579
- Fair: 580-669
- Good: 670-739
- Very Good: 740-799
- Excellent: 800-850
What kinds of financial decisions affect your credit score?
Applying for credit, opening a new line of credit, or having a credit reporting error might cause a temporary dip in your credit score, but it will ultimately recover. Other financial decisions, such as making late payments, having a high credit utilization ratio, closing accounts, or applying for a lot credit all at once, can affect your credit for years.
Despite the temporary drops caused by credit inquiries, opening new lines of credit through credit cards can help you build good credit so long as you manage it responsibly and keep your credit utilization under 30% —this means your balance is less than 30% of your total available credit. When your total available credit is high and your balance is low, your credit score builds over time. This will make it easier to obtain a home loan in the future by saving money on interest rates, money that can be saved or invested in high-yield accounts.
Credit monitoring services are a good way to track your credit score through the major credit bureaus. This allows you to notice and address discrepancies sooner rather than later. In addition, credit unions like Neighbors CU offer additional credit protection on their credit cards in order to prevent fraud and damage to your credit score.
Stay Informed About Local Economic Trends
Making informed financial decisions means understanding both national and local economic trends. If you’re considering investing in stocks, real estate, or local businesses, you’ll want to keep up to date on these trends and changes. Follow St. Louis economic news, such as developments in the tech sector, shifts in the housing market, and employment rates. Increasingly, the greater St. Louis region is a hotspot for entrepreneurism and venture capital investment. Knowing which industries are growing allows you to make wise investment decisions.
Contact Neighbors Credit Union to open a bank account and start building your financial future!
