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Investing in your 30s
In your 20s, it's normal to make a few money mistakes. Chalk it up to life experience and move on. Once you reach your 30s, though, it's time to put those tough lessons to good use. With a decade of career experience under your belt, you may be earning a lot more. You can make the most of those hard-earned dollars by investing.
Start with your emergency fund
You may have experienced your share of financial emergencies in your 20s. Major car repairs and medical bills happen— often when it’s least convenient. If you didn’t have enough cash, you may have relied on high-interest credit cards and paying them off isn’t easy. It's a costly lesson on why your emergency fund is so important.
Experts suggest setting aside three to six months of your family’s living expenses.
If you own a home, you also need a separate fund for ongoing maintenance and repairs. Your goal should be one to four percent of your home’s value per year. So, if your home is worth $300,000, set aside an extra $3,000 to $12,000 per year. Both emergency fundsshould be in cash for easy access.
Boost your retirement savings
With more experience, you may now be earning a higher salary to match. While it may be tempting to upgrade your lifestyle, check on your retirement goals first.
Experts suggest saving at least ten percent of your income for retirement.
If you’re not there yet, try boosting your 401(k) or 403(b) contributions by one to two percent throughout the year. Set reminders every quarter to see where you can make adjustments. And if you have the option, be sure to take advantage of employer matches. An extra two or three percent could make a big difference — making it easier to reach the ten percent goal.
Save for college
Once your debt and retirement plans are underway, it's time to think about your children.
Experts suggest starting early when it comes to saving for your child's college costs.
The average college expenses are currently at $21,370 - $48,510 per year. There is no telling how high it may be in the future. One popular way to save and invest for college is through a 529 savings plan. This plan offers many perks, including tax breaks at both the state and federal level, as long as you spend the money on qualified education expenses.
Like your other investment accounts, your risk tolerance and timeline are important. For example, if you have a 3-year-old, you may have 15 years to save. But for your 10-year-old, the timeline shrinks to only 8 years.
Now’s the time to start
Your 30s are important for both your career and your family’s financial future. Well into your profession, there’s still plenty of raises, promotions, and new jobs to look forward to. As your income goes up, it takes discipline to keep saving and investing. But as you see progress, you may feel motivated to keep the momentum going.
By setting your goals now, it will be that much easier to double down in the future.