Everyone wants to put some money away for retirement or even just a rainy day, but surprisingly few people actually manage to accumulate savings. According to a study by Northwestern Mutual, one in three Americans have less than $5,000 set aside as retirement savings, and 21 percent have no retirement savings at all. Another survey by Bankrate shows that 13 percent of Americans are saving less for retirement than they were a year ago, largely because their income hasn’t changed while the cost of living continues to rise.
In addition to retirement, everyone should maintain savings in case of an emergency. Most experts recommend having an emergency nest egg of half a year’s salary, or enough to live off of for six months. Even if you are just starting out, saving a few hundred dollars each month can be enough to keep you out of financial trouble, and over time a little monthly savings can accumulate into a healthy emergency fund.
If you are looking for easy ways to build your savings account, there are any number of strategies you can use. The real secret is to bring in more income than you spend so you can allocate surplus dollars for savings rather than everyday expenses.
Here are eight savings tips to consider:
1. Adopt the 50-30-20 budgeting rule.
In order to control expenses and build savings, you have to have a family budget. Your budget should account for predictable expenses, such as rent and loan payments, and variable expenses, such as utilities and grocery bills. It should also accommodate additional spending for entertainment or the unexpected. The 50/30/20 rule was developed for household budgeting—50 percent of income for needs, 30 percent of income for wants, and 20 percent of income for savings. This approach may seem simplistic (and for many, unachievable), but if you can set aside as much as 20 percent of your income each month, you can build a hefty retirement fund.
2. Cut your spending.
If you don’t have enough to save, try cutting your costs so you have extra money. There are any number of ways you can cut expenses, from eliminating your daily cappuccino to canceling your cable TV service. If you decide to cut expenses, be sure you put the money into savings rather than using it for something else.
3. Generate extra cash with a side hustle.
More people are taking on additional gigs to help pay the bills. Whether you decide to sell handcrafted goods on Etsy or make extra money driving for Lyft or Uber, if you can generate additional income, you can put that money aside in a savings account.
4. Maintain multiple bank accounts.
You want to make it harder to access your savings for everyday expenses. That’s why it makes sense to isolate savings in separate accounts. A savings or money market account puts money aside so it is harder to spend, although you can access that money if you need it for an emergency. If you are looking for a long-term saving strategy, consider locking your money away in a CD or Roth IRA that will earn interest but also has penalties for cashing out early. As far as checking accounts, make sure the account you choose is working for you. iQ’s Intelligent Checking is an option that rewards you in cash each month, for doing many of the things you already are—like using your debit card, setting up direct deposit, receiving eStatements, and so on.
5. Set up automatic funds transfers.
One tool that many banks and credit unions offer is automatic funds transfers to help you build savings. It’s relatively easy to set up a monthly or semimonthly funds transfer, or to allocate part of your automatic deposits (e.g., your paycheck) so a preset amount goes into your savings account. Here at iQ, we offer the Easy Saver program, which automatically rounds up the dollar value of each purchase and puts the difference in your savings account. It’s a seamless savings strategy that requires no additional effort on your end!
6. Save using credit card cash rewards.
Many credit cards offer cash back on spending, giving you cash rewards that you can use for other purposes, such as savings. Take those bonus reward dollars and put them in your savings account.
Gamification has proven itself to be a great motivator, so why not make savings a game? Try new game strategies to save more money, such as setting “no spend” monthly goals, or even setting up a household “swear jar” and putting the money into savings. There are even a variety of mobile apps and online tools to help make saving money fun.
8. Find the right savings vehicles.
No matter how you choose to save, you want your money to work for you. Rather than putting your cash under a mattress, open a savings account or a money market account that yields interest on your money. Interest rates vary, so shop for the highest returns on your cash. Also, consider locking your money away in a short-term or long-term CD or individual retirement account where your money is harder to access.
If you need help managing your finances and saving for the future, talk to the financial advisor at your local credit union. They can counsel you on the types of savings options available and help you set up a strategy for long-term savings success. If you can start saving today and keep at it, you’ll have cash when you need it in the future.