When You Should Start Saving For Each Major Life Event


Often, we get so caught up in the day-to-day aspects of life that we forget where we want to be in the future, especially regarding finances. Planning for financial needs 10, 20, or even 50+ years down the road feels daunting and unpredictable – but it doesn’t have to be!

Here’s a closer look at major life milestones, how much they cost, and when to start saving for them. Don’t worry if you feel like you’re already behind on this whole savings thing – we’ve got some remedies to help you catch-up.


Going to College


College is one of life’s earliest milestones, helping your child to broaden their horizons and increasing their chances for success. Unfortunately, college is also one of life’s biggest expenses. 

As you likely already know, college costs have skyrocketed in recent years. According to the college experts at US News and World Report, costs grew by 63% from 2008 to 2020. Annual average tuition and fees for 2019 to 2020 school year are:
  • $11,260 for in-state residents at public colleges
  • $27,120 for out-of-state students at state schools
  • $41,426 for students at private colleges 

Conventional wisdom says you should start saving for your child’s college from the moment they’re born, or even before. However, financial expert and author Dave Ramsey recommend holding off on college until you meet the following financial goals first:
  • Pay of any debt, including credit cards and student loans
  • Establish an emergency fund of three to six months
  • Pay 15% of your income towards retirement savings

Once you’re ready to save, an Education IRA is a popular option. Also called an Education Savings Account, you can put up to $2,000 into it each year. If you put the maximum amount in each year following the first of your child, your total investment would be $36,000. 

Although the rate varies based on the specific product, it’s usually higher than a traditional savings account. Plus, withdrawing the money for education is tax-free.



Buying a Home


Buying your first home is another major milestone. For most people, it’s the largest purchase they’ll make. A report from Zillow says that the median home price in the US is $231,700, with a median list price per square foot of $155. 

Who's buying? According to a report from The New York Times, the average first-time homebuyer is 32 years old with a salary of $72,000 a year.

Don’t feel bad if you’re not quite on that track. According to the Bureau of Labor Statistics, the average salary for someone who works 40 hours a week is $46,800. First-time home buyers typically have a higher salary than most people. 

Fortunately, you can still buy a home even if you’re not in a high salary bracket. First, you’ll want to start saving as soon as you’re financially comfortable. Prepare to save for two to five years before you begin the buying process in earnest.

If you can put down a sizeable down payment, you’ll get far more favorable terms from lenders. Realtor.com recommends making a 20% down payment if possible, which gives you the following benefits:
  • Favorable loan terms
  • Mortgage insurance is no longer required
  • Instant 20% equity in your home you can borrow against 

Generally, you’ll have an easier time buying a home if you save for a few years for a down payment instead of jumping right into homeownership. 

Considering the average homeowner is 32, you should start saving for a home around 25. For most people, their mid-to-late twenties are when they’re starting to advance in their careers and can afford to increase their savings.


Related: How To Make Money By Hosting On Airbnb




Getting Married


According to wedding experts The Knot, the average cost of a wedding in the US is a whopping $33, 931! Fortunately, there’s good news. Unlike the earlier entries on our list, you have far more control over wedding costs. For instance:
  • You can limit the guests
  • You can serve a limited menu
  • The bride’s family, the groom's family, and the bride and groom themselves can split costs

According to an article from Women’s Health, the average age of marriage is 27 for women and 29 for men. People are getting married later in life than ever before, and financial concerns are a major reason why.

Saving for marriage is a personal decision based on your age, income, and life goals. You’ll likely need to save for at least a few years for a wedding. However, more and more couples are choosing to not prioritize a wedding until later in life.


Retirement


Saving for retirement is fairly easy if you start in your twenties and remain consistent. However, who on Earth starts saving for retirement in their twenties?

Don’t worry if you’re in your 30s, 40s, or even 50s without adequate retirement plans in place. The experts at US News and World Report have a few suggestions:

If you’re in your 30s and 40s, prioritize paying down high-interest credit card debt. Then split your focus between paying down any student loans and contributing towards retirement. Because you still have 30 years or more before you’ll tap into the account, compound interest can turn even small monthly contributions into something significant later on. 

Once you enter your late 40s or 50s, retirement savings become more of a priority. Homeowners will want to build as much equity in their homes as possible, in case they need to borrow against it later in life.


Related: The 5 Best Debt Consolidation Companies



Final Word


Attending college, getting married, buying a home, and other significant milestones are some of life’s most exciting events. While they each have related expenses, proper planning helps ensure you can pay for them during the appropriate time. Removing the financial stress from these major events makes them all the more enjoyable!


Related: These 2020 Savings Tips Will Save You Hundreds

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