In need of an emergency fund? A new car? Or maybe a nice vacation? Most people probably said yes to all of these questions. However, a majority of people have little to nothing put away for any one of these. Many financial experts agree that everyone should have at least $1000 in savings for an emergency. In 2013, The Fed asked respondents how they would pay for a $400 emergency and the answer…. “52% of respondents indicated that such an expense would be a challenge to handle or simply could not cover the expense.” https://www.federalreserve.gov/econresdata/2014-economic-well-being-of-us-households-in-2013-savings-behavior.htm
Is this surprising to hear? Unfortunately for me, it is not.
I know what it is like to “rob Peter to pay Paul,” and I am way too familiar with what it is like to struggle to have “extra” money laying around. Many people today are living paycheck to paycheck and cannot imagine finding extra money to put away for savings. However, it does not mean people do not want to try.
I would like to share some ideas that have helped me to reach multiple goals of saving money and to continue to save for other goals as well. There are a couple of things to think about before jumping right in.
First, for me, it was psychological. I needed to be ready to do without. Maybe it was less of a paycheck or one less “latte” I had that week. I had to set a new habit. Therefore, I had to think about it every day and be intentional with my savings.
Second, I started small – small savings and small goals. I set a goal of saving $100 and put into action by saving $5 a week. Many think saving $5 a week is not enough to make a difference so why save at all? After 20 weeks, that is $100. It still may not sound like much, but should a flat tire happen, $100 should cover the repair. Once the first goal of $100 is reached, then set the next goal of $200.
When possible, make it automatic. Whether it is an automatic deposit from a paycheck or an automatic draft from a checking account to a savings account, it will not be missed if it was never there.
So get creative or trick yourself if necessary. Below are some obvious and not-so-obvious ways to save money.
The more obvious ways to save:
- Every pay day make a deposit into a separate savings account. Or better yet, set up an automatic transfer.
- Set up your paycheck to be deposited into checking and savings automatically.
- Add the name of the savings account to your list of bills, then write one check to that account every month and physically deposit it.
The above scenarios may not be an option. Here are some other less obvious ways to save:
- Clip coupons for grocery savings. However much is saved in coupons, deposit or transfer that amount into a separate savings account.
- Set aside an allotted amount for grocery shopping. If $200 is the budgeted amount and the receipt shows $180 was spent, put the $20 saved into a savings account immediately.
- Do not spend coins and put away in a jar. Once filled, take to the bank and deposit into a savings account.Do not spend a particular denomination of bills. For example, I do not spend $5 bills. When I pay for an item with a $20 bill and my change I receive back includes a $5 bill, I put the $5 bill in a different part of my wallet and I put away when I get home. Once I have $100, I take to the bank and deposit into a savings account.
- If you budget $100 for your water bill that month and it comes in at $80, then move the other $20 to savings. (This requires following a budget every month. Again, being intentional with your money AND another topic of discussion….)
Imagine if you set up a specific savings account and put all of the above steps into action. You could build up an emergency fund or vacation fund pretty quickly. The little things really do add up.
Finally, set up your savings account at an online bank. That way, you cannot touch the money quickly should you want to impulse spend. I like Capital One 360 for my savings accounts. They will let you set up multiple accounts which is nice if you have multiple goals, i.e. Emergency Fund, Annual Insurance Premiums, Vacation, etc.
Do you have any ideas for putting money away for a rainy day? The quirkier the better! Please share!