How to Start Building Your Savings
When you graduate college and land your first job, you’re often living paycheck to paycheck. It can be hard to build up some savings when you’re living like this, but it is important to try. Financial disasters can and do happen, so it’s important to be prepared. Here are some tips on building your savings.
Set Some Goals
What do you want to save for? Maybe you just want an emergency fund in case anything should ever happen. Maybe you’ll need a new car soon, or you want to buy a house before you’re 30. Whatever it is, figure out what you want to start saving for.
A lot of people recommend having an emergency fund that is at least $1000. Some recommend having 6, or sometimes even 12, months worth of expenses in your savings just in case you lose your job. This can be daunting and nearly impossible when you’re just starting out. It doesn’t matter how big or small your financial goals are. Just set some and try your hardest to reach them.
Open Separate Savings Accounts
I’m a fan of opening more than one savings account. I have an account for my emergency fund, another account for my taxes (I’m self-employed and need to pay estimate tax payments throughout the year), and another account for purchases I want to save up for (right now, new tires for my car).
I recommend having some or at least one of your savings accounts with a separate bank than your regular bank that you use for checking. I have my emergency fund and tax savings accounts with Ally Bank, which is an online bank. I highly recommend REPUTABLE online banks for savings accounts because they usually have much better interest rates than normal banks. They are able to do this since they don’t have to pay for physical bank branches. Another advantage with having a separate online savings account is that it sort of just goes to the back of your mind. You don’t completely forget that you have the account, but you don’t think about it as much as your primary bank, which makes it way less likely that you’ll “borrow” money from your savings to go toward spending.
These banks work great if you get the majority of your money through checks. You can’t deposit cash with these banks, so keep that in mind. Two well known, reputable online banks are Ally and Capital One 360.
Put Money In Every Week
Even if it’s just $1, try to put some money in your savings every week. $1 a week for a whole year is $52 more dollars than you would have had in savings. With some banks, you can even designate a percentage of your paycheck to go to your savings account. Try putting 5% of your paycheck to savings. Chances are, you’ll still get by just fine.
Put Random Checks in Savings
I sometimes get random checks from family members for small holidays. Or a friend owes me a small amount of money and decides to pay me with a check. I always put things like this in my savings. It’s unexpected money, so I haven’t adjusted my budget around it. I don’t need that money for any of my expenses, because I already factored money in for that since I wasn’t expecting this money. Scenarios like this are perfect savings-building opportunities.
Small Savings is Better Than No Savings
I’m repeating myself a little bit here because it’s important. Putting any amount into your savings is better than putting in none.
How often do you get coffee at a shop? Or go out to eat? Or buy one more thing than you should at Target? We’re all guilty of things like this. But if you want to get serious about your savings, try eliminating some of these things. If you stopped getting coffee at a shop, and instead put that $5 toward your savings, you would have a good little chunk in your savings account at the end of every month. Even just eating out one less time a month and putting that $20 toward savings would be an extra $240 in your savings at the end of the year. Challenge yourself to find creative ways to add to your savings. Building up savings on a budget is not impossible!