Q&A: A saving guide for Millennials

The Millennial generation—defined by the Pew Research Center as those born between 1977 and 1992—faces an interesting set of challenges when it comes to saving their money. Many of them have seemingly insurmountable student loan debt (not to mention credit card debt), while others are still living at home with their parents as they look for work.

With all of this debt, it's a surprise to experts that this generation is actually quite wary of outstanding payments. After all, this is the generation that helplessly watched the value of their parents' homes sink underwater as a result of the Great Recession only a few years ago. Some analysts say Millennials are enthusiastic about saving money, but aren't sure where to start.

To answer that conundrum, we enlisted the help of Tom White, co-founder and CEO of the independent financial planning startup iQuantifi, to help us break down a few strategies that this generation can use to financially prepare themselves for the future.

Look at Your Budgeting Percentages

Try thinking of your budget in terms of a pie chart. No more than 50 percent of your take-home pay should be dedicated to mandatory expenses, advises White. This bucket includes rent, food, recurring medical bills and prescriptions, transportation, and utilities like heat and electricity.

Savings should consist of at least 10 percent (more, if possible) of your monthly income. Discretionary entertainment, as well as dining out and traveling, should be given an allocation of no more than 10 to 20 percent, he says.

Start Contributing to Your Emergency Fund

An emergency fund is vital for the health of your savings goals. "Try to start by saving one months' worth of expenses," White recommends. "Do this by setting up automatic deductions and pretty soon, you will meet your goal."

Already have a month's worth of money in the bank? Bump it up to six month's worth. That way, White says, you won't have to go into debt to address anything life may throw your way.

Pay Attention to Cash Flow Over Student Loan Repayment

News stories of hefty student loans can get Millennials down and lead them astray from their saving habits. "I see people in this generation who think they need to pay off their student loan debt as soon as possible," White says. "They make it such a high priority that they put themselves in a poor position in terms of cash reserves.

"It is very important to put a plan into place to pay off one's student loans," he says. You should also keep in mind that the interest on these loans may be tax-deductible, up to $2,500.

Get Serious About Financial Goals

Without clear goals, it can be difficult to find the motivation to save. Spend time thinking about what you'd like to financially achieve in your life. Are you looking to buy a house someday? What about a new car? Do you have any interest in going to graduate school in the future? Would you like to retire before you're 65 years old?

"Goals are personal and important to think about when coming up with a savings plan," White says. "Once you are funding all of your goals, have fun and spend the rest."

Prioritize Your Retirement

White sees Millennials focused on saving for the short-term (the next 24 to 36 months), but they neglect to consider far into the future. And with retirement forty-some years out for many members of this generation, it can be difficult to get excited about putting money away in a 401(k) or an IRA. But he insists that it's essential to start planning now because every little bit—even $25 per month—counts.

"If, within your 401(k) plan, your employer offers a match, contribute at least the amount that they match," White recommends. "It's free money."

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