Start Saving Now

If you don’t pay your rent or cell-phone bill, the consequences are immediate. If you fail to stash money in savings as soon as you start earning a paycheck, you probably won’t notice the damage right away. But the long-term fallout can be devastating if it limits your choices—whether that’s buying the house you want, sending your kids to a top college, or deciding when (or even if) you can retire.

As illustrated below for example, say Jane is 25 years old and puts $500 into a mutual fund that earns 8% a year, adding $100 each month. She’ll wind up with more than $335,000 by the time she's 65, excluding taxes. Richard, on the other hand, waits until he's 35, invests $2,500 and then adds that $100 a month. All else being equal he’ll have only about $167,000 by age 65.

Pay Yourself First

If you skim savings off the top of each paycheck, the cash will disappear before you have a chance to miss it. With a 401(k) retirement plan at work, for example, your employer pulls the amount you designate from each paycheck. For other savings, you can schedule automatic transfers from your checking account. You may want to set up multiple savings accounts if that helps you track progress toward each goal more easily.

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Saving for retirement is usually priority number one, but you should also create an emergency fund that holds enough cash to cover at least six months’ worth of living expenses (see Smart Money Moves for Young Adults). Then, assuming you have a plan to pay off any debts, you can move on to saving for your other goals.

Choose a Bank

Any savings that you may need to access in a pinch (and that includes your emergency fund) should reside in a bank, where your money is insured. Savings accounts and money market deposit accounts, which often pay more than regular savings accounts, are generally easy to access. At www.depositaccounts.com, look for accounts available in your area that pay top interest rates. Watch out for minimum-balance requirements and monthly maintenance or transfer charges.

You don’t have to have a checking account and savings account in the same place. Banks are increasingly offering convenient features such as mobile check deposit, which allows you to submit a check by snapping a picture of it with your smart phone. Online banks, such as Ally Bank and Evantage Bank, let you perform many of the same transactions as a traditional bank.

Wherever you put your money, watch for fees. If you regularly get cash from other banks’ ATMs, you could pay hundreds of dollars a year in extra charges. Some banks will reimburse you for fees that other banks charge you for using their ATMs; the State Farm Bank Free Checking Account, for one, will refund all ATM charges if you have direct deposit. Other in­stitutions are members of large, surcharge-free ATM networks, such as the Allpoint network. Most banks waive monthly maintenance fees on checking accounts if you have a monthly direct deposit or maintain a minimum balance.

This story was originally published in the June 2014 issue of Kiplinger's Personal Finance.