When it comes to millennial parents, we’re all free falling while knitting our own safety net. Pensions seem to be going the way of VCRs and flip phones. Even the Social Security Administration warns that it will eventually have to curb benefits unless Congress shores up the program. That means the onus is increasingly on young parents to save, save, save money in order to create financial security later in life.
The reality is that relatively few actually do. A recent survey by Bankrate offered a sober assessment: nearly 70 percent of Americans are putting away 10 percent or less of their earnings each year (that includes 21 percent who aren’t saving, period).
There are certainly compelling reasons for that breakdown. Add up the cost of childcare, health insurance, housing and so on, and there just isn’t a lot left over in many households. Still, with the right habits, even some low- and middle-income families have the potential to turn things around.
How? We talked to three “super-saver” parents – those who have managed to sock away 25 percent or more of their income — to find out how they actually make it happen. Thoughtfulness, ingenuity, and a desire to avoid the finer things certainly helps.
1. Understand Why You’re Saving.
Scott Perry, a married father of two, is an outlier among Millennials. The project manager from Raleigh, North Carolina is managing to put away more than 30 percent of his pay, despite having a wife who left the workforce recently to stay home with their young children. A huge part of that is intentionality, says Perry, 32. From the outset, he and his wife, Jennifer, agreed that they would put away 20 percent of their income for retirement and the other 10 percent for their church. “It’s clearly knowing what you value as an individual and what your family values,” says Perry. “Talk to your spouse about that and make sure you have a consensus.”
Creating specific goals not only helps point you in the right direction, but acts as an important motivator, says Rebecca Lake. The single mom from eastern North Carolina has managed to build a nest egg of close to $500,000 over the past five years, even as she paid down a car loan and roughly $40,000 in student loans.
Whether it’s paying off medical bills or saving up for a first home, knowing what the payoff will be after a lot of belt-tightening is key. “Saving just isn’t as much fun if you don’t have a specific goal to reach for,” says the 41-year-old freelance writer.
2. Put a Plan in Place.
If step one is deciding on a destination, the next phase is figuring out how you’re going to get there. It might be contributing to a 401(k) at work or setting a 529 plan for your children’s future college tuition. “Get the accounts that you want to save money in place, then show up every month or every payday and put something into it – even if you have to start small,” says Lake. Whatever you decide to put away, Perry recommends making your contribution a part of your ongoing budget. For example, in addition to setting aside funds for retirement and tithing, he diverts around $200 every month to pad his family’s emergency fund. “It requires a conscious decision to pay yourself first,” he says.
3. Automate. Automate. Automate.
Technology can be a key ally in helping you achieve your savings goals, says John Bush, a financial planner near Grand Rapids, Michigan. For years, the father of two has automated his savings to ensure he and his wife put away 25-percent or more of their income – at least until he opened his own office this summer. That’s relatively easy to do if you have a 401(k)-style plan with your employer. But you can also set up regular bank drafts to build up emergency funds and other accounts for short-term needs. “Have it set up like a payroll deduction,” says the 29-year-old Bush. “When you get the check, decide how much goes out the same day so you never see those funds.” The Bushes aren’t the only ones to find success with this method. An analysis by the banking app Chime, for example, found that customers who used its automated savings feature put away three times more than those who didn’t.
4. Take Advantage of Employer Match
Putting enough into your retirement plan to maximize your employer’s match is like rocket fuel for your savings goals. That’s exactly what Bush’s wife, Bethany, did until recently, when she was working for the state of Michigan. Because the state retirement system offered both a mandatory contribution and matching funds, she was able to receive more than twice the amount she paid into the plan. Unfortunately, a lot of Americans aren’t heeding that advice. According to a 2017 review by the benefits administrator Alright Solutions, one of every five employees fails to meet their employer’s potential contribution, thus leaving free money on the table.
5. Know Where Your Money’s Going
At a time when app marketplaces are bursting at the seams with budgeting tools, there’s no excuse anymore for not tracking your monthly expenses. Perry says he used to keep his own spreadsheet to manage outlays, but recently turned to Mint for its sheer simplicity.For Bush, the app of choice is Personal Capital, which helps you create a budget and monitor your investments in one place. Because he and his wife are spending-averse by nature, he checks in a couple times a month to make sure there are no anomalies. If spending on groceries is well above normal, for example, he’ll sit down with his wife and they’ll discuss it.
But he acknowledges that there’s also a place for “zero-based budgeting,” a more detailed approach where you track every dollar going into your bank account. “For us it’s more reactive,” says Bush. “But some people may need to be more proactive if you’re more apt to spend money.”
6. Adjust Your Shopping Habits
Bush credits a lot of his success in the savings realm to avoiding big-ticket items that his family doesn’t need. The only cars he and his wife ever bought together were a used sedan and a minivan with 70,000 miles. But they’ve also tried to find ways to save substantial money on staple items like groceries and household products. Instead of going to a more traditional supermarket, the couple now does most of its shopping at the discount chain Aldi. They also make sure to stock up when the things they need are on sale. That could mean buying six months’ worth of diapers in a single trip. His wife even pays for an app that will notify them when items go on clearance. “Figuring out how to be resourceful in saving money is kind of a game for us,” says Bush.
Perry says one of the simplest ways to save is by reviewing your expenses and purging the things you simply don’t need. Or, as he puts it: “Be willing to cut what you don’t value.” Some of the easiest targets are those recurring expenses that might go unnoticed after awhile. “We’re one of the rare couples in our early-30s that doesn’t have Netflix, but the truth is that we don’t watch a ton of TV,” says Perry.
7. Get a Side Hustle
So what happens if you’ve wrung out all the fat you can possibly find in your budget? Our super-savers found that one of the best ways to boost their savings is through part-time work that helps generate extra income. Perry, for example, publishes a blog for baseball and softball players called CatchersHome.com in his spare time. Although the side gig brings in an extra $500 a month, you won’t find the young dad throwing it down at the nearest shopping mall. “None of that is used for discretionary spend at all,” he says. “Its entire purpose is to save.”