Generally speaking, financial advisors will tell you that it is critical to set up a savings and investment plan right away. Although the resulting amount still really is not enough (you should try to save six months' worth of expenses), it will be enough to pay the rent for a month or two. Simply put, without a chunk of savings to fall back on, many young adults will find themselves perilously close to eviction or forced to rely heavily on expensive credit card debt.Ī young adult without proper emergency savings should try to divert at least 10% of their earnings each month to an emergency fund for at least one year.
One of the biggest priorities for young adults needs to be establishing an emergency nest egg for a true emergency (as in "somebody wrecked my car"), not a triviality ("I've just got to get a new iPod"). This line item is both singularly important and yet an enormous wild card, and so deserves more than a simple one-liner. Note that there isn't a recommended percentage for savings and investment. Likewise, some people are perfectly happy subsisting on ramen noodles and would rather put more money toward clothing or a nicer car. If you live with your parents, you can move all of that housing allocation to other categories, while if you live in a major urban center, you might easily find yourself on the high end of the housing range even if you live far from the city center with roommates. These ranges clearly leave room for a lot of personal fine-tuning, and that flexibility is one of the advantages of the percentage method.
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