photography by PHUONG NGUYEN
As we can all attest, money is a very taboo topic. We earn it, we spend it, and more often than not, we pretend to have more if it than we actually do. Where do you turn for guidance on major, or even minor, money decisions? Are your parents good with money? Do you search online for advice? Do you ask friends? Are your friends any better with money than you? It’s hard to tell since we are all stuck in a holding pattern of being too anxious, too proud or too embarrassed to lay our proverbial cards on the table.
My name is Priya Malani, and I’m the co-founder of Stash Wealth, a modern financial firm for H.E.N.R.Y.s™ [High Earners, Not Rich Yet]. In 2009, I left my job on Wall Street to become a financial resource for our generation. For almost five years, Stash has been changing the way 20-somethings and 30-somethings think about their money—whether they’re saving for a vacation or thinking of buying an apartment.
Here’s the thing, starting small is better than not starting at all. And the sooner you start saving, the less you have to save overall, freeing up money for more fun things like upgrading your lifestyle—and your living quarters. Now we’re talking.
1. When to start saving for a home (and everything else).
Yesterday. The power of time on your savings is pretty much impossible to replicate. Every dollar you save when you’re 25 equates to about $16 in retirement. If you start at 35, every dollar is worth closer to eight dollars in retirement. Let’s make that even more tangible. For every spin class ($35) that you skip in your twenties, you’ll have $560 at age 65. To be clear, I’m not saying you should skip boutique fitness classes, or working out for that matter. But let’s create some perspective. If you take four spin classes per week, and you cut it back to 3, in one year you’ll have saved up the equivalent of $16,300 retirement dollars. That’s not chump change.
2. How to save.
Automation. This is the most critical part of saving successfully. I suggest one of two methods to my clients: Either reroute your paycheck to directly deposit your savings into a savings account or set up an automated link between your checking and savings accounts and systematically move money over either once a month or on payday.
3. Where to save.
Online banks. I had a client who received a sizeable commission check and because she wasn’t sure what to do with it, she left it in a checking account at her brick and mortar bank. We ran the numbers together and realized that over the course of the year, she earned about $20 in interest on that money. If she had kept it at an online bank, like CapitalOne360, she would have earned closer to $750. $730 MORE, simply because of the savings account she chose. Another great reason to use an online bank is to keep the money “out of sight and out of mind”. If you keep it at the same bank as your checking account, it’s very tempting to tap it and derail your savings momentum. If you have a few years before you plan to purchase your home, that kind of additional interest earned can put a sizable dent in your closing costs!
4. Keep your eye on the prize.
At Stash, we don’t believe in saving for the sake of saving. Unless you have a goal in mind (like that one-bedroom in Williamsburg), studies show that you’re almost always going to lose steam and get side-tracked or tempted to use your stash for something other than its intended purpose. Circling back to online banks, most of them allow you to nickname your savings account. Use this feature, and create a separate savings account for each goal. At CapitalOne360, you can have up to 25 accounts! I wouldn’t go that far but having one specifically for your new home will keep you motivated.