How To Get Into The Habit Of Saving Early, According To Money Experts
Saving money may not come easily to you, but it's necessary for your future, as you probably know. But you can start saving money early, even when it may seem impossible. "Instead of thinking about savings as a vague term, think about milestone expenses, like a wedding, a home down payment, or a new car," Ed Robinson, President and Co-Founder of Stash, tells Bustle. "Knowing what you want and how much those things cost will keep you excited about what you're saving for and keep your budget on track."
As you may know, some people have several different savings accounts, each for different goals, like that wedding and car Robinson mentioned. However, there are other tips to make saving money come naturally, and the sooner you begin, the better — even just a few dollars a day or week.
If you think about it, how much do you spend on coffee out each day, or every few days? Let's say you get a to-go coffee every morning on your way to work and let's say it's between $3-5 per day, which is $15-25 per five-day week. Then, when you add in how much you spend on food for lunch, assuming you eat out, or on the weekend, that's a lot of money you could be saving — at least some of it. And, of course, you can replace "coffee" with "snacks" or anything you're buying out of convenience (i.e., likely overpriced) that you could really just have at home, where it's cheaper to make your own coffee or buy snacks in bulk in advance versus at the corner store.
Here are seven easy ways you can get in the habit of saving early, because it IS easier than you may think.
1. Use Automatic Deposits
You may hear people talking about automating, but it may sound intimidating or you may think you need to automatically transfer over a lot of money each week for it to count. But wrong. Even if you just automate a very small amount of your paycheck into savings, whether that means a savings account or a Roth IRA, it'll still help your financial future. "Automatically deposit a certain percentage of your salary to your savings account," says Robinson. "Start with an amount you feel comfortable with setting aside and increase it with each promotion or salary bump."
Maggie Germano, Certified Financial Education Instructor and financial coach for women, agrees with Robinson. "And since that salary money is taken out pre-tax (usually), you won't even notice it's gone," she tells Bustle. "It's the same with any other type of savings account — you have to set it and forget it. Automate a small amount of money from each paycheck going into a savings account. You won't have to think about it, and over time, you'll have a nice chunk of money to protect you during an emergency."
2. Automate To More Than One Account
Yes, automate to more than one account. "Making it automatic is the single most effective way to stick to your money goals," Jennifer Barrett, Chief Education Officer at Acorns and Editor-in-Chief of Grow, tells Bustle. "I used to have all the best intentions, but something always seemed to come up and I'd either forget to transfer money or find something else to do with it. Now I have money automatically transferred not just to a 401(k) and IRA, but to a regular investment account for mid-term goals and to a savings account for unexpected expenses and short-term goals. Since the money is now transferred automatically after each pay day, I barely have time to miss it. And I plan my spending as if I never had it."
3. Make Sure You Have This Type Of Savings Account
Many savings accounts barely give you any interest, so your money is in their account, but barely growing. That's where high-yield savings accounts come into play. Brianna McGurran, Student Loans and Personal Finance Expert at NerdWallet and fellow female millennial, shared this tip with Bustle. "Say you decide to save $300 a month for a down payment, or for emergencies (ideally, you're already saving 10 percent to 15 percent of your income for retirement)," she tells Bustle. "Open a high-yield online savings account if you don't already have one, and ask HR to add it as a destination for direct deposit, in addition to your current checking account. My company lets you send either a flat amount or a percentage of your earnings to this account per paycheck; in this case, I'd ask to deposit $150 per paycheck into my savings account. And voilà; on your next pay day, you'll have $150 in savings, no recurring transfer from checking needed."
4. Have Your Employer Automate For You
This is just what it sounds like — have your HR or accounting department automate your paychecks for you. McGurran shared this tip, and it's a money-saving lifesaver. "I've seen people have lots of success splitting their paycheck into separate accounts," she says. "I didn't even know this was possible at my first few jobs, but it's probably the most efficient way out there to save. To set it up, all it takes is a few minutes with HR or on your online payroll portal, and you're in business."
5. Save *Something* Instead Of Nothing
I get it — you really have no extra money at your disposable to save. But if you track your spending, like all the aforementioned coffees and snacks, as well as other purchases you're making that you want versus need, you may find that you have money you could be saving instead. For instance, Stash is all about how you can invest for just $5 a month, and that applies to saving, too.
"It is a common misconception that people need to have A LOT of money in order to invest or save," Millennial Expert Chelsea Krost tells Bustle. "However, Stash is turning that misconception upside-down and empowering the millennial generation to get more educated on investing and the ability to start investing with only $5 a month. For first-time investors, putting up larger amounts of money and the need to open a traditional brokerage is no longer a must. All you need is a smart phone and a minimum of $5 to start investing." So, if you can invest for just $5 a month, you can certainly save with just $5 a month — and, in both cases, probably more than that!
Although many people follow the 50-30-20 rule, I know it may not be feasible for you right now. However, it's a great goal to achieve. "Follow the 50-30-20 rule," Sallie Krawcheck, CEO and Co-Founder of Ellevest, tells Bustle. "Fifty percent of your take-home pay should go to your needs: rent, food, insurance, and other basics. Thirty percent goes to fun. And 20 percent goes to your future."
6. Contribute More Than You Think You Can
You may not think you have a lot of extra money to put into various savings brackets, like your 401(k), but if you spend less in other areas of your life, you will. "I recommend stretching yourself a little," says Barrett. "Instead of contributing the default three percent in your 401(k), say, opt for four percent. (And increase that amount a little each year, as your income grows.) You can always move it back down later, but research shows you probably won't."
7. Start With $10 A Paycheck if You Can
I'm sure you know people, perhaps yourself, who make excuses for not saving — "I don't have enough money" to "I'm too young" to "I'll wait till 'X' age to start," and so on. But, the time really IS now, as soon as you stop making excuses for not saving. Trust me, many people have probably been there at some point.
"It's easy to put things off and say we'll get to them later," says Germano. "In fact, most of us do that with a lot of things. And do we ever actually get to them? Probably not! Saving money is the kind of thing that is key to start early, because it grows more and more over time and you'll get used to doing it. Even if you aren't earning very much money, try to set aside one percent of your income for a 401(k) or IRA — your retirement age self will thank you! Start small so you don't get intimidated. Set aside even $10 a paycheck if you can! A little bit is better than nothing, and you can increase it when you're able to."
As you can see, starting to save early is all about forming the habit early. And, like you saw above, once you automate your savings, you won't even have to think about it — unless you happen to increase the percentage you are saving. Happy saving!