TEMPLE, Texas — On this Money Talks, we answer a viewer question. For a young person, where should you save money? What's the best place to start?
The question is simple, the answer, however, not so much. Financial Advisor Rolandus Johnson gave some insight.
"The envelope method is a good way to get started," Johnson told 6 News. "I don't necessarily like the envelope method for long-time savings, there's so many different ways to save, mine number one right now is a brokerage account. That's the number one."
Instead of putting your monthly budgets in cash into envelopes, Johnson says to get a brokerage account so that you are in the market, and there is one other tool specifically that he advises.
"I’m a huge advocate of paying yourself first," Johnson said. "But I like to tell a lot of my younger clients that are maybe just getting out of college or maybe are a couple of years out of a college, and I don't want to give too specific of advice here, but a Roth IRA is a great place to start."
Only after working on your budget and finding how much is coming in versus how much is going out will you determine how much to save.
"I can't stress it enough, budget, budget, budget," Johnson told 6 News. "And any money that you have left over, try to take 25, 30 maybe 50 percent of anything that you have left over and put that away."
Johnson says the years are gone of the advice my mom gave me about taking advantage of my bank's savings account.
"Interest rates aren't what they were 20 or 30 years ago, and I don't think that we will ever get to that point on savings accounts again," Johnson said. "Who knows? You know, I’m a younger guy myself so I will say this, anytime you are trying to save money for a future endeavor, the less accessible that money is, the better you are going to be because you put it away and you know that if you've got to jump through a few hoops or jump through a couple of loops then nine times out of 10, you will give up on accessing it at that point. That's something that I’ve found in my years of running a financial practice."
Better than a savings account, shorter-term money market accounts are a good option right now in 2024.
"Those are great places to put money, but only for a short term and I wouldn't trust it over 3 years or so, but it's a great place right now to put some money if you're wanting to save or you want to start saving," Johnson said. "Those are some great places to put money and not having to worry about the market turbulence, you know you kind of get a pretty good interest rate without having to risk losing your money."
According to the Bureau of Labor Statistics, the average 25-year-old has $20,000 in savings and investments. So how do you line up?
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