In your teens and early 20s, it's easy to ignore the necessity of saving – you have a lifetime to do that, after all!
But the reality soon begins to sink in, as can the regret. To avoid that happening to you, here are some important financial lessons to learn before you're 30.
Don't spend your entire pay check
When your weekly or fortnightly pay reaches your bank account, the immediate feeling can be one of relief. You may have been running on fumes, so to speak, and now that you've been topped up, all of a sudden there is an entire list of things you plan on spending it on.
Instead of spending your entire pay check, however, commit to saving a certain amount and putting it away somewhere safe. Look at your weekly spending habits and highlight some items that you could really go without and start saving for the future.
Live within your means
This can be considered an extension of the prior point. When I was growing up, I had friends who were driving cars designed to make eyes turn – whether it was a Mercedes that was only a couple of years old or a brand-new Commodore. Most of us know or knew someone like that.
To be clear, some people can afford these items, but others buy them whilst completely eradicating their hard-earned savings at the same time. Others buy luxury watches or spend hundreds of dollars on alcohol each week which can have the same effect, over time.
The lesson isn't to never spend money, nor am I saying you should never buy those items. But aim to do so in moderation while not living beyond your means.
Don't take on too much debt
Let's face it, debt is necessary sometimes. Even some of the best savers out there will occasionally need to take on some leverage, whether it be to repair their car or purchase a house, or perhaps even to take advantage of an unbeatable holiday package.
But approach your lender or credit card provider with caution: the interest you'll be liable for mightn't seem overly bad to begin with, but it can be crippling over time if not managed or accounted for properly. Credit cards can be particularly bad, especially if you fail to make your repayments on time.
Have an emergency fund
To avoid having to take on copious amounts of debt, establish an emergency fund that you do not touch unless you absolutely have to.
As unlikely as they may seem, unexpected things can happen that can really put a dent on your plans: for instance, you may lose your job or have a car accident, while you may also need cash quickly for medicine or an emergency hospital or vet visit. If that happens, you'll want to be prepared.
Invest!
I can't stress this final point enough. As we highlighted here, investing legend Warren Buffett bought his first stock before he was even a teenager, and yet one of his biggest regrets is that he didn't start earlier!
By putting your money to work early in high-quality businesses, you allow the magic of compounding to work, over time. This grows your savings for when you need them later in life – whether it be to pay for a wedding or to pay a deposit on a new home.
BONUS: The Magic of Compound Interest
One of the best ways to benefit from the magic of compounding is by investing in shares offering solid dividend yields. These semi-regular payments of company profits can be added to your investments, adding to the power of the compounding machine.
Some companies that may be decent options today include Wesfarmers Ltd (ASX: WES) and Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). Both are well-established businesses with potential to continue growing from here, while they also pay solid dividends.
