Soft saving is a newer money mindset — especially popular among Gen Z — that's basically a middle path between living fully now and socking everything away for retirement. It acknowledges that life is expensive and uncertain, and rather than following strict saving targets, soft saving focuses on covering essentials and building a small safety net while also spending on things that bring joy.
In many ways, soft saving is the opposite of the FIRE movement, which stands for financial independence, retire early. FIRE encourages extreme frugality and aggressive investing so you can leave the workforce decades ahead of schedule. But instead of sacrificing today for tomorrow’s nest egg, soft savers are putting their mental health and present well-being first.
Don't Miss:
- Kevin O'Leary Loves ‘Wonderful Recurring Cash Flows' — These Small Industrial Assets Deliver Just That
- If there was a new fund backed by Jeff Bezos offering a 7-9% target yield with monthly dividends would you invest in it?
Why It's Especially Appealing to Gen Z
Soft saving may be appealing to Gen Z because they've grown up through a pandemic, economic volatility, rising housing costs and crushing student debt. Lots of traditional savings goals, like owning a home and retiring early, feel less accessible than they once did. Soft saving essentially offers a way to respond to that reality without completely giving up on saving for the future.
How Soft Saving Works in Practice
If you're interested in soft saving, here's what it could look like in practice:
- Make sure you've built a basic emergency fund and covered your essentials, like rent, bills and food.
- After covering essentials, you can decide what feels valuable to spend on now. For example, travel, classes, hobbies or small luxuries.
- Save what you can. If you can't save large percentages of your income, making even small automatic transfers to a savings account each month could still add up over time.
- Manage and pay down your debt, but don't let it completely stop you from living your life.
Trending: 7 Million Gamers Already Trust Gameflip With Their Digital Assets — Now You Can Own a Stake in the Platform
What to Watch Out For
Soft saving sounds nice, but it has its downsides. Because you're saving less aggressively, you could potentially fall short on retirement savings, emergency preparedness, debt payoff or large future expenses. Inflation and rising costs can also eat into the fun money that makes soft saving appealing in the first place.
Even though it's important to enjoy the present moment and live life fully, make sure to still set a few long-term financial goals, track your progress, and bump up savings when your income grows. This way, you won't have any financial regrets when you reach retirement age.
Read Next:
- Backed by $300M+ in Assets and Microsoft's Climate Fund, Farmland LP Opens Vital Farmland III to Accredited Investors
- Have $100k+ to invest? Charlie Munger says that's the toughest milestone — don't stall now. Get matched with a fiduciary advisor and keep building
Image: Shutterstock
