We all want to save money and pad our bank accounts for retirement. Unfortunately, it’s easy for savings to vanish long before retirement if you don’t have a sound financial strategy. Everything from unexpected emergencies or downturns in the economy to sudden job changes or surprise expenses can dry up savings. However, there are ways to boost your savings today, whether you’re starting from scratch or you simply want to jump-start your savings plan.
How to Build a Savings Account
According to a report from the Federal Reserve, only 40% of Americans believe their retirement plans are on the right track. That same study found a quarter of U.S. adults don’t have any retirement savings. At the same time, the average personal savings for Americans dropped by 15% in the last year.
Although it’s important to secure savings for emergencies and retirement, there’s no need to panic if you feel behind. Here are eight simple ways to build a savings account:
1. Create a budget.
Creating a budget is the first step in grabbing control of your finances and growing your savings account. We’ve found it’s best to start by mapping out predictable expenses, such as rent and loan payments. From there, we suggest calculating variable expenses, such as utilities and grocery bills. It’s also smart to budget for additional spending for entertainment or unexpected events.
Not sure how to divvy out your budget?
We suggest following the 50/30/20 rule. Under the 50/30/20 rule, you set aside 50% of your income for needs, 30% for wants, and 20% for savings. This approach may seem simple, but when you perfect it, you’ll be setting aside as much as 20% of your income each month—and that can grow into a hefty retirement fund.
2. Cut your spending.
One of the easiest ways to increase savings is to cut costs. And there are many ways to slash expenses without having to make major lifestyle sacrifices. For instance, saving more money may be as easy as skipping a daily cappuccino, eating at home a few extra times per month, or combing through your credit card statements and canceling any subscriptions you aren’t using. Shift that money into a savings account, and it will add up quickly.
3. Start a side hustle.
More people are taking on additional gigs to help pay the bills than ever. And one survey found that 76% of people who have a side hustle love it. Whether you decide to sell handcrafted goods on Etsy, make extra money driving for Lyft or Uber, pull in cash walking dogs, or pick up any other side job, every little uptick in income helps. If you can generate additional income, you can put that money aside in a savings account.
4. Build spending barriers.
Another easy way to bolster savings is to make it harder to tap into your savings account for everyday expenses. One trick we’ve found to help is setting up a separate account for savings. A savings or money market account puts money aside, so it is harder to spend. If you’re looking for a long-term saving strategy, consider locking your money away in a CD or Roth IRA that will earn interest but also tack on penalties for cashing out early.
5. Set up automatic payments.
One of the best ways to grow a savings account is to set up an automatic process that moves a bit of every paycheck into your savings account. 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 so that a preset amount goes into your savings account. 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. Stash away credit card rewards.
Credit card perks can also add extra cash to your savings fund. Many credit cards offer cash back on spending, giving you cash rewards that you can use for other purposes, such as saving. One of the easiest ways to build out your savings account is to stash those reward dollars in your savings.
7. Turn saving into a challenge.
Gamification can be a great motivator, so why not make savings a game? Especially if you’re competitive, it can be fun to try out 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. Treat savings as investments.
No matter how you choose to save, you can increase your savings pool by investing. Rather than putting your cash under a mattress, consider opening 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 (IRA) where your money is harder to access.
If you need help managing your finances and saving for the future, talk to a financial planner or advisor at your local credit union. They can counsel you on the types of savings options and help you set up a strategy for long-term savings success.
Start Saving for the Future Now
No matter what savings strategy you pick up, the sooner you start, the better. And the first step to carving out more savings is mastering budgeting. Check out our Financial Survival Guide today to learn more tips on how to secure financial freedom in the future.