The tricks to building a savings account are not a mystery. You simply stash money away before it can be spent. That being said, saving money is hard for a lot of people. If you are one of those people, here are some of the secrets.
Tips To Building An Emergency Savings
- Set A Savings Goal
This is the first step, because it will give you a target to shoot for. A good starting goal is 3 times your monthly expenses. This is a good amount that would help you overcome sickness or the loss of employment. So, if your base bills are $3000 a month, you should shoot for an emergency savings of $9000.
Having that target will help you stay motivated and chip away at your goal. Once you reach your goal, you can then set a higher one. Keep doing that again and again until you have a very impressive savings account. If three months of expenses seems like a huge amount to you, go with a smaller goal. Maybe saving for one months of expenses will be more motivating.
- Make Small Changes
Little things can add up to huge amounts. For example, bring your lunch to work twice a week and save an easy $20 to $30 a week. That is $1000 to $1500 of savings in a year. Skipping that chain coffee store in the morning could save you $5 a day or more. That could add up to over $1200 a year in savings and your work probably has free coffee. Just make sure that the money goes into your savings. On the days that you skip going out to lunch, make a $10 transfer from your checking account to your savings.
- Make Saving Part Of Your Budget
If you do not have a budget, make one. There are a lot of free tools online that will help you do that. One part of your budget should be savings. You should be ideally saving at least 10% of your net or take home pay. If you are not able to do that, try to make cuts in other parts of your budget. Shop for cheaper car insurance, get your food in bulk from the discount store or maybe switch to a cheaper electricity provider. Refinance your car to get out of that high car payment. There are so may ways to cut your fixed expenses. As you make cuts, transfer the money you were spending into your savings budget.
- Make Your Savings Hard To Get
Open your savings account with a bank other than the one that you regularly bank with. This will prevent your bank from automatically linking the two accounts. You can still remotely link the two accounts so that you can make deposits but it eliminates immediate savings transfers. In addition, if the bank hosting your savings accounts issues you an ATM card, tear it up. The only way that you should be able to access your savings is by going into the bank in person. Who wants to do that.
- Make A Deadline
In order to be able to reach a goal, you need to set a deadline. This will give you the added pressure to get things done, just be reasonable. You want a goal that is attainable so that you do not let yourself down and give up. How much do you reasonably think that you can save in 12 months? Make that your goal and know how much you need to save each month. Can you beat your deadline? Let’s find out.
- Automate Savings
Nearly every bank allows you to make automatic deposits to your savings account. The account does not even need to be hosted at the same place as your checking account. Set a transfer to occur the same day that you receive your check and then you will not even need to consider the money. Out of sight and out of mind.
- Extra Money Means Extra Savings
If you come into extra money, by all means treat yourself but also put aside a portion for saving. For example, you get a $2000 tax return, put half of that into your savings. Get a bonus from work, deposit half of it into your savings. It is basically found money anyway so you will never miss it.
- Keep A Change Jar
This is pretty old school but it still works. At the end of every day, throw your change into a jar. When the jar is full, take it to a coin counting machine and then deposit the proceeds into your savings account. That change can really add up in a hurry and you might fid yourself depositing an easy $100 at a time.
- Shop For Deals
Shop for deals on the products and services that you use and put the discount into your savings account. A good place to search is Groupon. If you have a date night coming up, check Groupon for date deals and get a discount on a local restaurant. Take the money you did not spend and add it to savings. Also, when you buy products, look for rebates. When you get that rebate check, deposit it straight into savings.
- Watch Your Money Build
After a bit of saving, you should start to enjoy watching your account build. This may not occur when you have a few hundred dollars in there, but when you have a few thousand dollars, it is a whole other world. There really is nothing like the feeling of pride and security that comes with having an emergency savings account. Once you get that feeling, it will become much easier for you to be frugal and save.