Saving is important. That’s something you already know. Whether it’s to have money for a rainy day, your next big vacation, or as a contribution to your retirement plan, saving is a non-negotiable.
So why does it feel so hard? What exactly are the biggest hurdles we face? As we lay out some of the blockages that may be impeding better saving habits, we’ll also offer rebuttals to shift your mindset into a more positive frame.
The goal here is to identify where your biggest challenges lie and offer solutions that can lead to incremental improvements.
In the present financial climate, it’s easy to feel discouraged from saving because you think you can’t save enough to make a difference.This brings us to our first tip.
Some is better than none
It’s not always feasible to find extra space in your budget to save. If it is, then the question becomes what number is actually worth it to you? What number will truly make an impact in the long run? The short answer – any amount. Even if you’re not saving as much as you would like to, you are building a habit that will become more effective as your income grows.
Naturally, the habits you form with smaller amounts of money will be habits you sustain with more. So any amount you save serves the dual purpose of creating positive financial habits and building long term financial stability. As your savings increase you can also look for opportunities to make your money work for you. There are many options to choose from when you’re ready to venture down this road, but one accessible and low risk path is through the vehicle of an interest-earning savings account.
Interest-Earning Savings Account
These kinds of accounts usually accrue interest daily and return interest monthly. They can be an easy way to start earning money on your savings without extra effort and little to no risk. While they don’t offer major returns, they are a great option for beginners looking for an opportunity to bolster their savings efforts. If you’re looking for higher return opportunities, you may be interested in an investment account. Disclaimer: it’s important to do thorough research before embarking on new investment ventures to confirm whether they align with your immediate and long term financial goals.
Money Market Investment Account
One way to dip your toes into investments in a relatively low-risk environment is through mutual funds. The downside: these accounts have withdrawal restrictions and balance requirements. The upside: they offer more earning potential than a traditional savings account. With a money market investment account, you can count on predictable returns while still enjoying easy access to your money if you need it.
Here’s a quick breakdown on how they work. Think of many people adding money into a pot which is then used to purchase different stocks, bonds and other investments. These investments are diverse enough to keep risk minimal, but still offer a significant return.
Certificates of Deposit
If you’re looking for a guaranteed return on your money, certificates of deposit, or CD’s, are a great opportunity. With CD’s, you give the bank a certain amount of money for a certain time period. In return, the bank agrees to pay the money back at the end of the term in addition to a set interest rate.
This is a safe way to make your money work for you that can balance out the volatility of financial markets. It’s important to note that this type of investment is hands off until the maturity date. If you decide to cash in on a CD before it reaches maturity, you’ll be penalized, earn less and potentially forfeit a portion of your original contribution.
Reduce your chance to spend
Money is easy to spend, but for most of us, not nearly as easy to save. There are too many avenues for it to cruise right out of your life – from the necessities to the nice-to-haves. If you want to ensure you hold onto more of it, this is one motto to live by.
The less you see, the less you want. The less you want, the less you spend.
Minimize your exposure to temptation. Unsubscribe from emails that encourage frivolous spending, don’t frequent places that push your willpower to the limit, and break free of “spend-ships” (relationships that promote irresponsible behavior).
You know the ones we’re talking about. You get together for brunch and $300 later, you’re wondering how you wandered so far away from your meticulously crafted budget.
One way to ditch the habit and keep the friendship is through what social media has coined “loud budgeting”, or being upfront and honest about your commitment to your budget with friends and family. This will keep you from falling back into unwanted habits and set effective boundaries with the people around you.
Save First and Save Fast
If you approach saving as an afterthought, you’ll probably never do it. If you automate saving, you’ll probably never stop. You might not like the feeling of managing your life, but life does require a certain degree of management.
The best solution? Automate everything – well, everything you can anyway. By automating saving, you can consistently improve your finances without so much as a second thought (which is perhaps for the best). Given the opportunity to think it over too deeply, you might find something else you would rather do with your money.
So let’s keep this simple and make saving a well-oiled machine. Once we’ve put the machine into motion, we can step away and spend more of our mental energy on more desirable endeavors.
Saving can be challenging, sure, but not rack-your-brain challenging like algebra. It’s more like the challenge of getting up from a really comfortable position on the couch to do something you know deep down is important. While you grunt your way up to responsible adulthood, don’t be afraid to grasp for the extra coins that have fallen between the cushions. Every penny counts here. Now off you go! You’ve got saving to do and tips to help you along the way.
