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It’s never too early to start saving for retirement, so Gen Z should be thinking about it.
While this generation is not behind when it comes to saving for retirement, it is good practice to form good habits now and start saving in your youth to get the most out of your savings.
LearnLux’s financial planner Mamie Wheaton told Insider that she would tell Gen Z several things about retirement if they can.
1. Having an emergency fund could save your retirement savings
If you don’t have an emergency fund yet, it’s worth setting one up, Wheaton said.
“I would say one of the # 1 things I wish I could tell them is have an emergency fund of three to six months of spending,” she said.
An emergency fund is money set aside and is only affected when absolutely necessary. Putting that money aside now will not only help you in an emergency, it could also benefit you later. In an emergency, many people turn to their retirement savings for help, which could permanently limit the amount you have saved for retirement.
Wheaton suggests a high yield savings account for emergency funds, where money can grow while still being easily accessible if needed.
2. Save in different ways
While your office 401 (k) program is a great place to start saving, Wheaton is encouraging Gen Z to think about other ways to save money as well. “Keep saving so that you can develop multiple sources of income,” she said.
With different types of accounts, you’ll have the flexibility to use your money when you need it, like if you decide to retire early, and lower your tax bill in retirement. “Invest in your 401 (k), but also consider investing in an IRA and having non-retirement investments,” Wheaton said. There are also several ways to save if you don’t have access to a 401 (k).
When it comes time to use your money, it can be beneficial to have several different accounts. It increases the limit on how much you can save each year and can give you more flexibility and options when you need them later.
IRAs and brokerage accounts are easy to open and can be opened at a number of institutions, with which you may already have a relationship.
3. Gen Z got off to a good start, so keep it up
For the most part, Wheaton says she’s impressed with the Gen Z retirement savings trends so far. “I actually think Gen Z is ahead of the game when it comes to starting saving for retirement,” she said.
About 70% of Gen Z already have a retirement account, according to data from Transamerica. While typical Gen Y started saving at 25, typical Gen Z started at 19. And, with compound interest helping money grow over time, Gen Z could be a lot better off after they started out younger.
“I think a lot of them started saving earlier because they’re a tech-savvy generation and have so much access to information and the importance of saving for retirement,” she declared.
Continuing the savings trend could put this generation in an excellent position for retirement later.