An essay that went viral from millennial blog Elite Daily has got at least several other media outlets up in arms for providing what some call “jaw-droppingly” bad advice: The author, Lauren Martin, argues that “if you have savings in your 20s, you’re doing something wrong.”
Of course, this is a dangerous mindset to encourage in young people, many of whom are saddled with student debt and face careers with no guarantee of a comfortable retirement. Saving even a small amount of income is the only way you can protect yourself from financial shocks and invest in your future. But there is one thing the writer gets right—at least halfway: “When you’re saving for yourself, you’re refusing to bet on yourself.”
Taking risks and “betting on yourself” in your 20s is an undeniably great idea.
What that could mean is going back to graduate school, traveling abroad and learning foreign languages, taking night classes to master a new skill like coding, or even just moving to a new city to start over. (Which is not at all the same thing as spending money on overpriced drinks at nightclubs in order to “network,” as Martin suggests.)
In fact, financial planner Michael Kitces explains, investing in your “human” capital often makes more sense than investing in your “financial” capital, especially when you’re young:
In other words, there are times when spending money on yourself will actually pay off way more than saving.
But it’s wrong to suggest that saving prevents millennials from investing in themselves—or even enjoying the “poetry” of life.
Yes, contributing money to your 401(k) isn’t the most alluring idea, in that it means your paycheck will look smaller. But the money you invest is pre-tax, compounds over time, and sometimes even comes with a generous employer match. So that 10% (or, ideally, 15%) of income you save in your early years will result in a much larger retirement stash than you might expect—in some cases, millions. Sure, Burning Man might sound fun, but so does literally being a millionaire.
And one of the perks of automated 401(k) contributions is that, as behavioral economists have noted, most people don’t even notice the money is gone. You get used to seeing the same amount in your paycheck month to month, and you learn to budget in fun using the money you do have available.
One more serious point to consider is that younger Americans tend not to be prepared for the kinds of financial emergencies that can send people spiraling into debt. In fact, a recent study found that 67% of millennials don’t even have enough of a rainy-day fund to pay for one emergency room visit or car repair, let alone cover living expenses in the case of a job loss.
So even though you should still be able to enjoy yourself, splurging should never be at the expense of basic financial security.
Trust us: There’s not much poetry in a life full of debt.