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Originally published Sunday, May 8, 2005 at 12:00 AM

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Savings savvy not on many young minds

At 24, Jeffrey Berman is in better financial shape than many of his peers. He has no student loans, thanks to his parents, and about $1,200...

The Associated Press

CHICAGO — At 24, Jeffrey Berman is in better financial shape than many of his peers. He has no student loans, thanks to his parents, and about $1,200 in credit-card debt, which he plans to pay off with his income-tax refund.

He just started contributing $85 a month to his 401(k), an amount he considers paltry but better than nothing.

Still, Berman knows he should save more money.

And as more companies cut pensions and Social Security remains a question mark, financial experts would agree — especially as young people's debt from student loans and credit cards continues to skyrocket.

"The twentysomething generation, more than any other generation, is going to be left to fend for itself," says Bill Slater, the St. Louis-based vice president of retirement and savings plans for MetLife.

A recent survey of the insurer's clients and employers found that 40 percent of workers ages 21 to 30 had not begun to save for retirement — and many young adults don't know how to even begin doing so.

Tips for young savers

Based on advice from financial experts:

Set a budget: At the beginning of every month, sit down and look at how much money you'll have coming in. Subtract the amount you'll owe for bills that are due and make a plan for what's left over. It's a simple idea. The trick is actually doing it, keeping track of what you spend and resisting the urge to pull out the credit or debit card when you can't afford something.

Save early and often: Even if you're only able to put away $10 or $20 a week now, do it. By starting young, you'll reap the benefits of compound interest. For instance, if a 25-year-old deposited $20 a week into a retirement account until age 34, that money would be worth more at age 65 than $20 deposited weekly at the same rate from age 35 all the way to 65.

Automatic deductions: Having money automatically deducted from your paycheck into savings and retirement accounts assures you'll actually put some away. Experts say that, in time, you'll get used to doing without the money. Some also suggest making sure it's not too easy to transfer money from your savings to your checking account — or to use a debit card to tap into your savings when your willpower is low.

Think retirement now: With fewer employers offering pensions, finding alternative forms of saving is especially important. Opening an account to pad your pension is a good idea, too.

Enroll in your 401(k), especially if your employer offers matching funds (what some financial experts like to call "free money"). Other options include a Roth IRA or mutual funds.

The Associated Press

"No one teaches you what you're supposed to do," says Berman, who graduated from Syracuse University two years ago and now works as an assistant to a Los Angeles entertainment-studio executive.

"It's a real shock getting out into the real world."

Growing up in the comfort of more prosperous times has made the adjustment much more difficult for this generation, one expert says.

"Through high school, the stock market was doing great; unemployment was low," says Catherine Williams, the Chicago-based vice president of financial literacy for Money Management International, a consumer credit-counseling service.

High expectations

That caused many young people to have high expectations about their own financial futures — until reality hit.

One example of the financial pinch: Student-loan balances for the average college graduate were $18,900 in 2002, more than double the amount a decade earlier, even when adjusted for inflation, according to researchers at Demos, a nonpartisan public-policy group.

Their analysis of the most recent Federal Reserve data available also found that average credit-card debt for adults age 24 to 34 was $4,088 in 2001, an increase of 55 percent since 1992.

While some data indicate the current generation is saving more than previous groups of twentysomethings, those earlier generations started in better financial shape.

Shavonne Mott, 25, a news-magazine research assistant in Laurel, Md., knows how debt can make saving difficult.

Shortly after graduation from college in 2002, she moved home to both save and try to pay off her student loans.

Automatic deduction

She recently began having money automatically deducted from her paycheck and put into a savings account, with the hope of buying a home in five years.

The rest of her pay goes to more immediate concerns, including a car that breaks down "every other month" and to the credit-card debt she just can't seem to shake.

"I always get the idea in the back of my mind that at least I have a job and I'll be able to pay off the credit card later on. But of course, it never happens," says Mott, who has yet to enroll in her company's 401(k).

Other twentysomethings, including 23-year-old Michael Wilford, fear credit-card debt will keep them from ever buying a home.

"If I knew then what I know now, I would never have gotten myself into the debt that I am still struggling to climb out of," says Wilford, an aspiring author in Cape Neddick, Maine, who works at an electronics store to make ends meet.

Wilford got his first card at 18; he now thinks no one younger than 21 should have access to one.

He and others say they wish they had a chance to take classes that would have taught them to better handle their finances at a young age and how to think beyond the short term.

For Berman, the 24-year-old in Los Angeles, it took an honest review of his finances, which revealed he was spending too much money eating out at restaurants.

To remedy that, he's started buying more groceries so he can cook for himself — not always an easy thing to make himself do.

"But if I don't start trying to save more now," he says, "when am I going to start?"

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