Whether it’s a car, a house, a wedding, a vacation or even going to college, there are any number of big purchases and expenses a student or recent grad can expect to make at some point in their life. That’s why learning strategic ways to save is such a vital step toward achieving your goals — without compromising yourself or your financial well-being in the process.
So, how do you determine what your three biggest life purchases might be to effectively plan for them? Well, the answer to that question might differ depending on the person and their interests. However, on average, here are three of the most common larger life purchases — as well as a few helpful strategies to help you plan for them.
1. Retirement
If you’re like most working Americans, you’ve spent time thinking about what your retirement will look like. The trick, however, is knowing how to make that vision of retirement become a reality. While learning about and making contributions to your retirement realistically can happen at any age, it’s best to get started as soon as possible to maximize your growth and earning potential. Fortunately, there are several ways to get started on saving for your retirement.
- Start making 401(k) contributions: A 401(k) is an employer-provided, defined contribution plan. In many cases, the employer may match employee contributions to some percentage. There are two major types offered: traditional and Roth. With a traditional 401(k), contributions are made with pretax income, meaning withdrawals in retirement will be taxed. With a Roth 401(k), contributions are made with after-tax income, resulting in tax-free withdrawals in retirement. In either case, you typically want to put as much into your retirement account as possible each year. For example, in 2024, the limit is $23,000. If you can’t hit this number, put in as much as you can. Something is always better than nothing.
- Open a Roth IRA: A Roth IRA is a special individual retirement account where you pay taxes on money going into your account and then all future withdrawals are tax free. However, a Roth IRA is not employer provided and carries a contribution limit of $7,000 (for 2024). A Roth IRA is best when you think your marginal taxes will be higher in retirement than they are now. These accounts also carry certain restrictions based on how much you earn and if you file single or jointly.
- Try digital investing: If you want to start growing your wealth but you’re not quite sure how to get started, investing in a digital platform can provide an easy and affordable way for beginners to start building an investment portfolio. Digital investing typically has a low barrier to entry and can be used for retirement planning or to reach a one-time goal, such as a down payment on a home. The system typically invests funds based on the client’s time horizon and risk tolerance and rebalances automatically as needed. Your first interaction will most likely be a questionnaire designed to find out your goals and investing preferences.
2. Buying a House
One of the most obvious major purchases people make in their lifetime is a house — specifically their first house. So much thought, time and effort go into this monumental financial decision. So, if owning a home is on your future (or near future) radar, then it makes financial sense to start planning as early as possible. Check out these homebuying tips to help get you started.
- Begin researching home loan options now. Knowing what home loan options exist and are available to you, especially as a first-time homebuyer, could mean all the difference in helping you better understand the mortgage side of the home-buying process. Not only that but knowing what home loan options are available will also serve to help you set clear and achievable savings goals to work toward. Then when you are ready to purchase a home, having done this research in advance will help you streamline everything for a better overall experience.
- Start a home buying savings fund: Once you have an idea of what mortgage options are available to you, you’ll have a clearer idea of how much money you need to save to be financially able to cover the down payment and any other costs associated with the purchase of a new home. Opening a dedicated savings account and consistently contributing to it is a great way to hit that homeownership goal.
- Make sure your credit is healthy: Once you decide a new home is in your future, you’ll need to make sure your credit score is in good standing. A credit score ranges from 580 or less on the low or weak side and 800+ on the high or healthy side. A healthy score will help lenders determine whether you’re eligible for a mortgage, as well as directly impact the interest rate you’ll get on your loan. The higher the score, the lower the rate. Ideally you should check your credit at least 6 to 12 months before applying for a mortgage loan. This will give you time to improve a low score, if needed.
3. Starting a Family
The cost of having children is constantly on the rise — and for many, seemingly never ending. From the hospital bill the moment they’re born to that magical moment when the college tuition payment is due, there is no shortage of costs, purchases, and expenses associated with raising a family. However, starting a family doesn’t have to be a financial burden. By planning now, you can get a head start making smart financial moves that could help you save money and feel more confident for things to come. Consider these helpful tips as you make plans to start a family.
- Make a new-baby budget: When preparing for a baby, it’s easy to account for some of the bigger known purchases that need to be made, but it’s also a good idea to start putting together a budget for some of the little things, like diapers, formula, baby food, clothes and even babysitting. Having a budget in place will help you to decide where your money goes rather than wondering where it all went.
- Start, or amp up, an emergency savings fund: Even the most prepared parents are likely to encounter some unexpected surprises along the way. Saving for these unexpected costs before they happen can help you avoid having to borrow or rack up debt if, or when, they do. Plus, the peace of mind in knowing you have a dedicated savings fund set aside for such occasions is priceless.
- Open an education or tuition savings account: College may seem like years away when the kids are young, but every year counts when you’re investing in a long-term savings goal. Fortunately, there are plenty of education-specific savings plans that can help you start accumulating funds right away, even if the baby hasn’t arrived yet. From standard savings accounts to 529 plans, financially preparing for your future graduates is a great idea.
- Start saving for future expenses: While diapers and formula might feel like the bulk of what you’re buying with a newborn, babies tend to grow up fast — and so do their needs. If you feel like you are financially ready for a baby’s first few years, consider setting aside extra money in an interest-bearing account, like a savings account or money market account, or investing in a fixed-interest account like a certificate of deposit. All are great options to save for future expenses as your children get older.
We’re here for you — at every stage of life
Zions Bank is here for you with numerous tools and services to help you improve your financial situation and prepare for life’s milestone purchases.
Our branch teams are ready to answer any questions or support you in any way you need by phone, online or in person.
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