Financial experts often say to “pay yourself first.” What do they mean by this? On the most basic level, it means exactly what it says. You should “pay” yourself before you pay anyone else. This refers to putting away money in a savings or investment account before paying bills.
Most people who try this say they have good intentions, but they can’t seem to come up with the money at the end of the month. But what this means is that they didn’t pay themselves first. In other words, they did not make their savings account a priority over other things. If you want to always have money in a savings account for a rainy day, it is imperative that you put that as your top priority.
Think of paying yourself first not as a selfish thing, but rather as a “rainy day fund.” Who hasn’t experienced getting a paycheck and thinking you have the money you need for a month’s expenses only to find there’s a tire that needs to be fixed on one of your cars or some other unexpected expense. If there is an emergency fund in place, there will always be money to use for such emergencies.
Also, by putting aside a certain amount of money each month, savings accounts can grow larger so that it starts to add up as a sort of “nest egg” for future needs. This could be money to send a young person to college, to take a vacation, or even upgrading your home.
Whatever someone decides to do with the money later is up to them. The important thing is that they have a plan in place to save. Eventually, they will also want to learn to invest in secure investment options so that the money can grow over time. Only when your money starts to make money without you doing anything will you be able to say that your money is working for you.
When planning a young person’s college, it is not necessary to put all of one’s money into tuition. There are several different ways that you can invest in their future. Perhaps saving for half of the tuition per semester and helping the student earn some of their own money is a great idea. This way, you will still have money for the family needs that come up while also helping them prepare for their future. It will give them a sense that they can make it on their own as they learn to make and save more money.
Saving and investing money and paying yourself first is an important lesson to practice and to teach to young people in your life. It’s a lesson that will follow them throughout their life and pay off in big dividends.