Do you have a savings account? Most people will respond “yes.” But the real question is: is it actually accruing money?
Many people want to save, but when it comes to essentially adding money to their savings account, they’ll find they’d rather use the income for other things. Evidently, saving money is easier said than done. But in the long run, putting money away is much more helpful than harmful.
So how can you make sure that you’re saving as much as you can? One of the best ways to save is to set a certain payment from your paycheck to automatically go directly into your savings. It is worth it.
“You have to automate your savings,” says Greg McBride, CFA, senior financial analyst at Bankrate. “If you wait until the end of the month and try to save what's left, there's typically nothing left over.”
The easiest way to go about this is to treat your savings like your other bills.
"That automatic payment toward your retirement or your emergency savings is just like any other bill,” McBride says. “You're getting it taken care of right off the bat when you receive your paycheck.” So if you get paid bi-weekly, you’ll be putting aside money twice a month.
"Paying yourself first clears the biggest hurdle for saving, which is simply not being in the habit of saving," McBride continues. "It takes care of saving money before you have a chance to spend it. About how much to put aside, experts recommend putting 10% of your take-home salary into savings. But if you’re not able to put away that much, don’t fret. As long as you’re consistent, your savings will build.”
If you’re saving for multiple things, consider setting up multiple accounts for each item. Where’s the benefit in that?
"Labeling the various accounts with a specific name that reminds the account holder of what they are saving for can help deter them from withdrawing money from that account and subsequently spending it," explains Diane Morais, deposits and product integration executive at Ally Financial in Charlotte, NC.
"You can build an emergency savings fund while building a retirement fund or a college fund at the same time," McBride adds. "You have to attack both at the same time in the same way by automating your contributions."
Start automating your savings today. It’s quick, painless and, in the long run, will be worth it.