I Put This Goal Over Saving for Retirement -- and I Don't Regret It

I worked a lot as a teen holding down gigs like babysitting and running youth programming. And as tempting as it was to spend my earnings, I made a point to put the bulk of my pay into my savings account as per my parents' advice.

I continued to work throughout college, and while most of my earnings then went toward tuition and rent, I managed to pad my savings ever so slightly. But while I had a decent savings cushion by the time I graduated, I knew it wasn't enough.

As a general rule, it's a good idea to have enough money in your emergency fund to cover at least three months of living costs. I knew I didn't have enough money to cover three months of bills at that time. And I also knew that I wanted more money than that in savings before signing an apartment lease and taking on certain expenses.

As such, I spent my first couple of years post-college building up a six-month emergency fund. And in doing so, I neglected my retirement savings. But I also don't regret that.

Your near-term needs have to come first

It's definitely important to save money for retirement. And the more time you give yourself to invest for the future, the more of a nest egg you might build.

I knew that by not contributing to an IRA in my early 20s (my company didn't offer a 401(k) plan), I was losing out on the opportunity to grow that money. But I also knew I needed a financial safety net for the near term before worrying about the long term. So I put my emergency fund above my retirement savings until my balance got to a place where I felt comfortable taking on expenses like a place of my own.

In fact, I actually lived at home for a brief period after college so I could build my emergency fund and pay off the debt I accumulated to get a college degree. It wasn't easy to go from living with friends to living with my parents. But my parents also aren't the intrusive type, so it wasn't a bad situation -- just perhaps not the most ideal.

The numbers make sense

You may be eager to start saving for retirement from a very young age. But before you start focusing on your IRA or 401(k), make sure you're all set with emergency savings.

You might earn a 10% annual return in your retirement account over the long run, since that's what the stock market has averaged over the past 50 years. But seeing as how the average credit card APR was 20.92% during the first quarter of 2023, according to data from the Federal Reserve, it makes sense to prioritize your emergency savings over retirement savings.

You're better off missing out on a 10% return in a retirement plan than having to charge surprise expenses on a credit card at almost 21% because you don't have the money in savings to cover them.

Once my emergency fund was in a place I was happy with, I made sure to open an IRA and start funding it regularly. But I don't regret making that a secondary goal at a time when my emergency fund needed work.