Part of getting older is watching younger generations live their lives and feeling at least a little perplexed by their slang terms, their favorite musical acts, and what they do with their money. I’m not quite ready for the nursing home yet; I’m a millennial (although older). And when I heard the term “soft saving” (or #soft saving, as it’s labeled on most Gen Z social media platforms, TikTok), I had to investigate further. So, what is soft savings?
The idea of soft saving is linked to living a soft life, another Gen Z trend (and one I can absolutely get behind). If you live a gentle life, you reject the culture of busyness and prioritize self-care, pleasure and good mental health – all of which are important. Soft saving means you don’t put as much money aside for future goals, like investing for retirement, saving money for a rainy day, etc., and instead spend more to take advantage of the present time.
Unfortunately, this can be a dangerous decision for your finances. Let’s take a closer look at two reasons and explore some options for smoother, healthier saving for your future.
1. You will miss out on compound growth
In the personal finance space, it’s very common to hear how important it is to start investing early. In fact, the longer the window of time you have to contribute to a 401(k) or IRA, the more your contributions will increase thanks to compound interest. When your money earns more money (for example, as the stock market rebounds) and is then reinvested, continuing to grow, it accumulates at work.
Let’s say you start contributing to a IRA account when you’re 25 and can save $250 a month. You invest this money in an S&P 500 exchange-traded fund (ETF), which measures the performance of the 500 largest companies on the market. THE average stock market return over the last 50 years it’s 10%, but let’s be conservative and say you earn 8%. If you retire at 65, you’ll have 40 years on the market and end up with over $782,000. But if you wait even 10 years, until age 35, to start this monthly investment, you’ll end up with about $342,000, less than half of your total from before. If you wanted to get the same return of $782,000, you would need to invest about $572 per month, more than double the $250 monthly tab that would have been sufficient ten years earlier.
Saving and investing can be difficult when you’re just starting out and are likely dealing with low salaries, debt, or probably both. But as you can see, it’s worth the effort. And hey, if you contribute to a traditional IRA or 401(k)you will reduce your current taxes.
2. Living without adequate savings is extremely stressful – and expensive
Until very recently, I lived paycheck to paycheck with no real savings, and let me tell you, it was no fun. If you do not have emergency fundthe first time you have an unexpected expense (and life is absolutely full of them), you’ll end up struggling to cover that bill or going into credit card debt to pay it off – and incurring interest in the process .
It is much better to save money every month. Even if all you can afford is to add $25 or $50 a month to your savings accountwhen an emergency arises, you will have a few money to mine that you won’t borrow.
Many people struggle to save because they simply don’t earn enough to cover their bills and put money aside, and I completely understand. In my experience, the best way to free up money to save is to bring in more. This might look like a part-time side hustle (maybe 10 hours a week walking dogs or driving for a rideshare service). or ask for a raise at your main gig.
It’s about finding a balance
So what is the solution ? For starters, I don’t recommend fully embracing any trend you see on social media. I think you can find a balance between prioritizing your mental health, well-being and happiness, and planning for the future. If you have money left over after paying your essential bills each month, I recommend putting some of it toward financial goals, like investing for retirement and building that all-important emergency fund.
Another option to consider is trying to reduce the cost of your fixed bills, such as your cell phone service, home internet or car insurance. Shopping for a new car insurer probably won’t take you a ton of time, and it’s certainly less of a hassle than trying to cut all the fun expenses out of your life – especially if you’re hoping to embrace a smooth life.
Mental health, happiness, and comfort are all incredibly important, and not just for Gen Z: for all of us. But to avoid a negative impact on your Personal Financetry to find a balance between saving and spending.
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