5 Ways to Grow Your Savings

Saving money is one of the best financial habits you can adopt and now is the time to get started. The past year has shed light on the importance of saving in the event of unforeseen financial emergencies. Saving money can help you pay for large purchases, avoid incurring debt, reduce your financial stress and provide you with a greater sense of financial independence. Having an adequate savings is part of a successful financial planning process, but it is commonly ignored. If you’re in need of a little money-saving motivation or want to develop better savings habits, there is no better time than the present to begin. Here are five tips to help kick start your savings.

  1. Establish a Specific Savings Goal – It’s important to consider your personal and financial goals for the next year, five years and ten years. Do you want to have a down payment for a home, buy a new car or save up for a wedding? It’s helpful to create a plan to know how much you need and what your timeline is. The money you get in your paycheck doesn't have to all go into a checking account. If you have trouble saving, automate it by sending a percentage of your paycheck to different accounts, like a separate savings account. Commit to your specific savings goal, set up your automatic transfers and watch it grow. Challenge yourself to find ways to spend less each month and you’ll be surprised how much all the little amounts add up in a savings account. For more tips on how to jump start your savings read our 4 Ways to Kick Start Your Savings blog.

  2. Curb Impulse Buys – You may think impulse buying isn’t a problem if you only buy what’s on sale. According to a survey by CNBC, consumers make approximately three impulse buys a week, adding up to as much as $450 a month or $5,400 a year! The most common impulse buy is food, which is why it’s important that you don’t go to the supermarket when you are hungry. Prepare a shopping list and stick to it. Set aside funds for a more costly indulgence like a weekend getaway or eating at a fancy restaurant. This may require a small sacrifice, such as working overtime, picking up a second job or paying off a debt first. The more you sacrifice, the bigger and more frequent your indulgences can be. Remember that it’s OK to reward yourself once in a while, however, make sure you budget accordingly for your indulgences. If there is no room in your budget for indulgences right now, alter it so that you’re not spending as much on other expenses.

  3. Create a Budget – A budget creates a roadmap for where your money will go, so you can make your hard-earned income work for you. Creating a personalized budget is important to developing the right spending habits, setting aside money for goals and ensuring the money in your bank account goes where it needs to. A budget assigns your money a task and establishes spending limits for specific expenditures so you can use your money responsibly. Most experts recommend tracking your spending for about 30 days to get an understanding of your spending habits. There are a few ways to track your spending. You can use a spreadsheet, online software or an app. This will provide you with a cash flow that shows your income, recurring fixed expenses like your mortgage or rent and your non-recurring and discretionary variable expenses like dining out and shopping. Next, you will want to subtract your expenses from your income. Afterwards hopefully you will have money left over each month that can be used for other things, like building up your savings. If you don’t have money left over, this will provide insight that you’re most likely spending too much with your discretionary expenses and will need to make appropriate adjustments. For more tips on budgeting see How to Budget Your Money Using the 50/20/30 Rule.

  4. Save for Retirement – Start saving for retirement the moment you start a job. Most employers will offer a 401(k) retirement plan for their employees with a contribution match. Be sure to contribute at least the employer match on each paycheck, so you don’t leave free money on the table. That means that each dollar you save in your 401(k), your employer partially matches your contribution, up to a certain percentage. Employer matching is a key job benefit that can significantly boost your 401(k) retirement savings over the long term. It might seem crazy to think of retirement when you’re 23 years old, but the reality is that things happen later in life that may disrupt your ability to save. If you buy a house or have kids, milestones like these may shift your financial priorities for a period of time, making it harder to save for things like retirement. So start saving early and let your money work for you in a retirement plan.

  5. Build an Emergency Fund – The biggest financial lesson learned during the pandemic has been the importance of having an emergency account, so you can be financially prepared if something unexpected happens. Sudden unemployment, illness, injury or a leaky roof can create large unanticipated expenses. This is why experts recommend setting up a savings account intended explicitly for emergencies. Ultimately, this fund should contain enough money to cover at least three to six months of non-discretionary expenses, like your mortgage, utilities, car loans and other bills that must be paid each month. Since most people may be stretched thin to fund this account all at once, set up an automatic transfer from your checking account that can slowly and steadily grow it. If you can set aside $200 a month, if you start now, in a year you’ll have a $2,400 nest egg to help cover any unexpected expenses, and you can continue to build from there.

No matter how you decide to begin your savings plan, we hope you will take these steps to get started and make at least one change to help grow your savings.

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