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.
Jeanne says
I used to know a wood shop teacher and he made me what he called a “FUN FUND.” This was etched into the side of an octagonal, wooden bank…that was nailed shut. I stuck change and occasional dollar bills – I REALLY had to know when it was time to bust into it since we had to take a saw and cut the top off!
(We did it neatly so we could reattach it and start over!!)
Jeanne says
Thank you for writing this! I KNOW I missed out on saving thousands of dollars by not enrolling in my company’s 402b..I didn’t understand the theory of pre tax contributions and finally started small and love to watch it grow!
I too live by a spreadsheet to know where every penny goes and have been able to save almost $1,000 in the past five months!!! I now have two bank accounts-both with direct deposit. One is for general household bills which are all paid automatically. The other is for weekly spending including groceries, gas, birthdays, hair appointments, etc. AND I DON’T FEEL DEPRIVED AT ALL!!!
And then there’s the minimalizing around the house…what a cleansing experience!!!
John says
At my work we have a deferred compensation plan, which I contribute to automatically with each paycheck. Been doing it for years and have a nice sum now. Your post is great advice!
Brenda Laurence says
I keep my emergency fund in a lock box at my bank which makes it very inconvenient to tap in to.
Noel says
Our grandson is almost six. When he was born, I started a savings account for his college. As of right now, I have saved almost $8,000 in that account. And we are retired grandparents with a small income. It can be done. Every quarter I save for him makes me feel good!
Jeanne says
That is wonderful Noel! What a great gift to give him at some point…graduation, college, wedding..good job.
Stacy says
Spot on! Kids grow up so fast and in a few years your grandson probably won’t remember any toys or trinkets you bought him, but he will bless you when he needs tuition or money to establish his future.
Nicole Waterfall says
Good for you Noel. We have done the same for each of our grandchildren. Even a small amount every month works because it adds up over the years until they are ready for college. I think that investing in their future is the best gift you can give your grandkids.
For any of you who live in Canada, check out the benefits of a Registered Education Savings Plan. [The government of Canada will match your savings inside an RESP. The match is called the Canada Education Savings Grant (CESG). Everyone gets the 20-per-cent match on $2,500 contributed per child per year, but if your income is lower, you can get a 30-per-cent or 40-per-cent match on the first $500 saved each year.]
Alisha says
I’ve started using an app called Digit that slowly pulls money from your checking and deposits it into a savings account that is not connected to your checking account. It sends me text updates daily and I can always check my balance. It seems I’ve already put away $250 in two months pretty painlessly. I didn’t even miss it. I think sometimes it’s easier having something pull out the cash than making the decision to do it myself!
Judy says
A lady I work with told me she puts EVERY $5.00 bill she gets into savings. She told me that you’d be surprised just how quick it all adds up…and you never miss it.
Belinda Thompson says
I started doing this some time ago and it really is amazing how much can be put back. Now when I end up with a $5 in change it’s a mental fist bump “cha-ching”.
joy perkins says
I also never spend $5s but instead give them away – either directly to someone that needs it or as an additional tip to someone that gives me good service.
Jo Jo says
In the U.K. we have a £2 coin which you don’t see all that often and I do the same, put it into a tin until I have £100 then bank it.
Arcadia Trask says
I like the idea of an automatic withdrawal every month into a savings account – but it’s not a full solution. Most of the 20 – 30 somethings I know have no idea how to budget, and while a savings account is a good first step, it doesn’t solve the problem of ‘whoops! I overspent, gotta use that $20 I saved for gas.’ Simple bank, You Need a Budget (YNAB app) and checking out the subreddits r/frugal may be a better plan over all.
As always, YMMV. http://bit.ly/1UgWVam
Ula says
For me the best motivation to saving is seeing my spendings. I always thought I spend little but after the first month when I have written down my every spending – I was terrified! “just this” and “only that” purchases are adding up… Tracking your expenses is necessary.
Jada says
I think of it as like its a bill that had to be paid and do it on the same day of every month, same amount. That mentality keeps me budgeted.