For many of us, saving money doesn't come naturally. About 55 million people, representing one-quarter of Americans, have no savings at all1. And 40 percent of Americans2 sometimes struggle to pay for basic needs such as food and housing, which means having savings is even more important.
Everyone knows you should save money— not only can your savings help you avoid depending on credit cards and other forms of debt in the event of unexpected expenses, but it can also help you reach your financial goals, like preparing for retirement or purchasing a car, a home, or an education. While tackling those huge goals can seem overwhelming it can actually be simpler than you think. Just start small and keep it simple. These five tips will help you reach those bigger goals, one step at a time.
1. Set one specific goal.
Rather than socking away money into a savings account, set specific goals for your savings. If you don't have an emergency account, start with a goal to save enough to cover a home repair, car repair, or other unplanned expense that you'll inevitably face. When you've reached that goal, set another—with the ultimate goal of saving about three-to-six-months' worth of expenses in an emergency account. Do this and you'll have a cushion in the event of a job loss or other unexpected event. Apply this same principal for any of your financial goals or aspirations. Looking to buy a housewithin the next year? Perhaps you’re getting married or want to take an extra special vacation. When you have a goal that you’re working toward, saving money becomes more satisfying and not another chore.
2. Budget for savings.
Just because you decide to save doesn't mean it's going to happen. If you're accustomed to spending your entire paycheck, changing that habit will take some planning. Ease into it by starting small – take the $5 you would normally spend on coffee and put it in an account. Each week up the amount until you’re saving about 10 to 15 % of your paycheck. If you don't have a budget or a spending plan, sit down and write one out. Just as you include a line item for each of your monthly bills, also include a line item for saving and don't allow yourself to spend it on anything else.
3. Make saving automatic.
It can be easy to forget to deposit money into your savings account each week or month — and it's also easy to spend it before you move it. Avoid both of those problems by setting up an automatic deposit from your paycheck into your savings account. You can also set up an automatic transfer from your checking account to your savings account to ensure that a certain amount is set aside each week or month.
4. Keep separate accounts.
If you think you'll be tempted to transfer your savings into your checking account, open a savings accountat a different bank from where your accounts are located. If your savings aren't easily accessible, you're less likely to dip into them unnecessarily.
5. Monitor & watch it grow.
Keep track of your account and your progress toward your goal. It’s exciting to set a goal and see your hard work pay off as you build toward it. When you start seeing your savings account balance grow, it can be tempting to dip into it to pay bills or splurge on something you want. Commit to leaving the money there and using it only for emergencies or whatever financial goal it was intended.
Remember, getting started is the hardest part. Don’t worry whether you can put all of these tips into action. Every step is a huge step in the right direction. Your future self will thank you when you reach your goals and have your savings safety net.
FAQs
The fiver challenge - save £7,000
This challenge works the same as the 52 week challenge, but you go up in multiples of £5 rather than £1. So week one = £5, week two = £10, all the way up to week 52 at £260. Alternatively, if you're not in the position to save these larger amounts, you could save £5 every week instead.
What are the steps of saving? ›
How to Save Money in 5 Steps
- Record your expenses. You do not need to have large amounts of money. ...
- Make your Plan and Set your Objectives. ...
- Planificá y establecé objetivos. ...
- Stay Focused on Your Priorities before Taking a Decision. ...
- Use Saving - Investment Strategies in the Financial System.
The fiver challenge - save £7,000
This challenge works the same as the 52 week challenge, but you go up in multiples of £5 rather than £1. So week one = £5, week two = £10, all the way up to week 52 at £260. Alternatively, if you're not in the position to save these larger amounts, you could save £5 every week instead.
What is the 5% rule for saving? ›
How about this instead—the 50/15/5 rule? It's our simple guideline for saving and spending: Aim to allocate no more than 50% of take-home pay to essential expenses, save 15% of pretax income for retirement savings, and keep 5% of take-home pay for short-term savings.
How to save money for dummies? ›
8 simple ways to save money
- Record your expenses. The first step to start saving money is figuring out how much you spend. ...
- Include saving in your budget. ...
- Find ways to cut spending. ...
- Determine your financial priorities. ...
- Pick the right tools. ...
- Make saving automatic.
- Watch your savings grow.
The premise of the 30-day savings rule is straightforward: When faced with the temptation of an impulse purchase, wait 30 days before committing to the buy. During this time, take the opportunity to evaluate the necessity and impact of the purchase on your overall financial goals.
What are the 5 steps in savings? ›
These five tips will help you reach those bigger goals, one step at a time.
- Set one specific goal. Rather than socking away money into a savings account, set specific goals for your savings. ...
- Budget for savings. ...
- Make saving automatic. ...
- Keep separate accounts. ...
- Monitor & watch it grow.
The following 3 steps can help you reach your savings goal.
- Draw up a budget. Making a monthly budget is essential if you want to save money in a strategic way. ...
- Build a contingency fund. If your budget is balanced or shows a surplus, the coast is clear for you to put some money aside. ...
- Save in a systematic way.
The basic principle of the golden rule of saving money is to save at least 20% of your income. This includes any form of income, such as salary, bonuses, or freelance earnings. By consistently saving a significant portion of your income, you can build a strong financial foundation and achieve your financial goals.
How to save a pound a day? ›
The £1 savings challenge involves putting £1 away each day for a year, saving you £365 in 365 days. Whether you choose to do this daily, weekly or monthly, you could transfer money into your savings account to take the temptation to spend away. You could even set up a standing order to make it super easy.
Save Every $5 Bill Challenge
If you are a cash user, then this is one of the easiest ways to save money. You simply save every single $5 bill you get. So, whenever you get change you will be hoarding those $5 bills like a chipmunk collecting nuts for winter.
How to save $10,000 in 6 months challenge? ›
How To Save $10,000 in 6 Months:
- Get Serious About Money Management. Benjamin Franklin undoubtedly was an expert on money management. ...
- Do Some Calculations. ...
- Never Pay Interest or Fees. ...
- Create Multiple Streams of Income. ...
- Cut Down Expenses. ...
- Open An Online Savings Account. ...
- Don't Be Tight Fisted. ...
- Treat Yo Self!
50 - Consider allocating no more than 50 percent of take-home pay to essential expenses. 15 - Try to save 15 percent of pretax income (including employer contributions) for retirement. 5 - Save for the unexpected by keeping 5 percent of take-home pay in short-term savings for unplanned expenses.
What is the 50 30 20 breakdown? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.
What is the 7 rule for savings? ›
The seven percent savings rule provides a simple yet powerful guideline—save seven percent of your gross income before any taxes or other deductions come out of your paycheck. Saving at this level can help you make continuous progress towards your financial goals through the inevitable ups and downs of life.
How do I start saving money when I have none? ›
Check out the following steps to start saving no matter what your income may be:
- Create a Budget. ...
- Open a Savings Account or Savings Pod. ...
- Drop Unneeded Monthly Memberships. ...
- Take a Hard Look at Your 'Unavoidable' Expenses. ...
- Save Money on Food. ...
- Save Money on Utilities. ...
- Commit to Buying Nothing New. ...
- Change Where You Keep Your Money.
The rule is to split your after-tax income into three categories of spending: 50% on needs, 30% on wants, and 20% on savings. 1. This intuitive and straightforward rule can help you draw up a reasonable budget that you can stick to over time in order to meet your financial goals.
How much money do I need to start saving? ›
At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.
What is the 30 30 30 rule for savings? ›
One of the most popular rules, the 30:30:30:10 rule, can be applied both in terms of income planning, as well as pension planning. The income planning version says that you put 30% of your income towards day-to-day expenses, 30% towards investments, 30% for retirement savings and 10% for emergency expenses.
