The recent news on Americans and their saving habits is concerning.
Here are headlines from three recent news articles:
- 47% of Americans would have trouble finding $400
- 2/3 of Americans would struggle to cover $1,000 crisis
- 1 in 3 Americans has saved $0 for retirement
This is not good news. Certainly, our current economic climate is not one that encourages saving (you know, with low interest rates and all), but that doesn’t mean it’s not important.
Money in savings provides a safety net for unexpected expenses. Saving money forces us to spend less than we make. And when the time comes for a major purchase, you’ll be glad you’ve been saving up.
The problem isn’t that we haven’t thought about saving money, the problem is that too many of us just aren’t doing it.
There are any number of reasons why people are not saving money. They may not think it is urgent or they may not have taken the time to set up a savings account. But my suspicion is that most people are not setting aside money for savings because they don’t think they have enough to do so.
When everything that gets earned, gets spent, saving is impossible. At the end of the month, there is simply nothing left over to save. So the action gets pushed to the next month… and then the next… and the next.
How then can we break that cycle in our lives?
I’d like to offer a simple idea to get you started—in fact, it is the same idea I give when people ask me about charitable giving.
Start small and start today.
I speak often about the benefit of generosity in our lives and how it improves our well-being and life satisfaction. The conversation is often followed by a simple question, “How do I get started? I want to be charitable, I just don’t see how I can be.”
My answer is this, “Just start with $1. Literally, $1. Go find a cause that you believe in and donate $1. Don’t be embarrassed. Because of online giving, you’ll probably never stand face-to-face with anybody anyway. So just start there. Go donate $1 today and see what happens.”
Of course, my hope is not that the person will end their charitable giving with a $1 donation. Instead, my hope is that they will donate $1 and soon discover that they still have food on the table, a roof over the head, and clothes on their back. They can be generous and still survive.
Soon, I hope, they will try giving $5/month. Inevitably, again, they will discover their needs are still being met. Maybe they had more capacity for generosity than they thought. Maybe then they will try $10/month or $15/month.
They did have room for generosity all along, they just needed to discover that was true.
The same is true when it comes to saving money.
If you want to spend less than you make, start building a savings account, and begin getting ahead financially, you can do it. Even if you don’t think it is possible, I believe it is. Start small and discover it is true yourself.
Think of the stress you can begin to alleviate by taking two small steps:
1. Set Up a Savings Account.
It is important to put your money for savings into a different account than you use for daily, weekly, and monthly bills.
Almost every bank offers savings accounts so check with your local bank first—wherever you already have an account established. However, sometimes these local banks have minimum balance requirements for savings accounts. If you are starting small ($10/month), you’ll want to check that first.
If you cannot find a local financial institution with a no minimum balance savings account, or if you prefer to conduct your finances online anyway, I use Capital One 360. They have a convenient, no minimum balance savings account available—and will even give you $25 for signing up. It’s easy to use—it took me less than 10 minutes to open an account with a $10 opening balance.
2. Set Up a $10/Month Automatic Withdraw.
Just start with $10. Literally $10. Set-up a savings account today and deposit $10. Don’t be embarrassed at the amount. If you select the online option above, you won’t ever have to interact face-to face with anybody anyway.
Deposit $10 and then set up an automatic withdrawal of $10/month, as close to the day you get paid as possible.
And then see what happens. Almost certainly, you will still have food on the table, a roof over your head, and clothes on your back. Once you prove that you can survive and save at the same time, raise your monthly contribution to $15/month or $20/month. Over time, perhaps, you’ll be able to increase the amount even more. But the first goal is to prove to yourself that you can save.
Your first investment into your financial security doesn’t need to be a big one. But you do need to start somewhere.
Automatic savings is effective. Forget about that money. It’s a small amount anway. It will add up pretty quickly without you even noticing it.
One of the easiest ways to save money is to give name brands the boot. In most cases, the only thing that’s better about brand-name products is the marketing. Look at that box! The logo is so fancy! And that’s about where it ends. Generic brands of medicine, staple food items, cleaning supplies and paper products cost far less than their brand-name, marked-up friends—and they work just as well too.
Pay yourself first! This works no matter how old you are and how much money you make.
Have 10% of your net income taken off at source and put into a savings account. You soon will not miss it and it will add up quickly. It doesn’t matter if you make $10 or $100,000 you pay yourself 10% right off the top. Once you have accumulated enough, you can invest this money for your long term savings goal.
Having another savings account for emergencies is also a really good idea if you can manage to do both.
Financial security is so much more rewarding than anything you can buy!
I want to also add a word of caution…it takes 2 signatures to open a joint checking and savings account, but only takes ONE person to close it out and remove all your money. 3 years ago, my now “ex” closed out our accounts and took off with Every dime we had saved and accumulated. Think about setting up an account in both names to pay the bills perhaps, but consider setting aside savings in your OWN name…wish I had gathered a nest egg…instead was left penniless…even lost my house! Plan ahead!
Target is so dangerous. I love shopping, but I love the satisfaction that comes with knowing I have money saved away more.
Thank you, Joshua! I opened a new savings account at my credit union right away, and my mind is buzzing with ways to fill it. I have a budget, and I do give some, but I didn’t take savings seriously enough. Starting today, this will be different.