Standard financial advice suggests having at least three months of expenses saved, but a recent study from AARP showed that a quarter of Americans who earn over $150,000 don’t have a savings account.
Especially now, having money tucked away is critical for emergencies and future planning, but with or without a pandemic, it is always a good idea to stash some of your earnings just in case.
There are several steps you can take to increase your savings 𑁋 and the best part is that you can start today!
Set Up Automatic Transfer to Savings. With online banking, it is easier than ever to arrange recurring transfers. Whether you transfer $50 or $200 per month is up to you, but many find the best time to do it is on payday. Even if you only set aside $5 per week, you will still have $260 in one year! (You can also split your direct deposit, too, instead of setting up an automatic transfer.)
Save Cash Windfalls. Tax refunds, performance bonuses, profit-sharing, and cash gifts are all sources of money that aren’t regularly in your monthly budget, so toss extra money like this into your savings account. It may not be as fun to save your bonus dollars as it would be to splurge on a new flat-screen TV but imagine the deep relief you’ll feel when you’re able to cover the expense of a broken dishwasher or unexpected medical bill.
Consider A High-Interest Checking Account. A high-interest checking account offers the flexibility of a traditional checking account with the benefit of earning dividends. They can be a great way to earn more interest on your spending money. With this account type, you can rack up extra savings quicker than a regular savings account.
Increase Your 401k Contribution. The average 401k contribution is around 3% of your annual income, but participants can contribute up to $19,000 annually. Most employers will match part of what you put in up to a certain amount, with the average partial match around 50% of what you put in up to 6% of your salary. With contributions from your employer, you’ll be able to retire more comfortably (and perhaps sooner than you planned), so increase your contributions 𑁋 and therefore your employer’s match 𑁋 if you can.
Double-Check Your Recurring Monthly Expenses. Take a deep dive into your recurring monthly expenses to see where you can save. If you have a gym membership you rarely use, or a subscription to a digital newspaper you never read, consider canceling and allocating those dollars to your savings account instead. After all, you can always go for a jog outside and visit news sources without paywalls.
There are other ways to save, too, like forgoing your bi-monthly pedicure or limiting your weekday lunch purchases, but it’s possible to enjoy these things and save, also, when you implement some or all of the tips above.