Small change plays a big role in
achieving your savings dreams
some people, saving money each week may mean the difference between
a homemade tuna sandwich and the tuna entrée at Fisherman's Wharf.
While some families can't fathom saving
money each week, building a nest egg is certainly doable, and with
careful tracking it won't eat into your mortgage or car payments.
We've come up with some surefire tips to help you pay down those bills,
go on vacation or save up for a child's college education.
Here's the goal: saving $6,000 in two years -- which
translates to about $55.90 each week, depending upon interest earned.
That's two years from today -- so get started!
Leanne Washington did just that. The 34-year-old Baltimore teacher
is living proof that eating leftovers pays.
Washington says she couldn't cut back on her evenings
out to McDonald's with her two sons or save any money.
"It was so easy to take the kids out to eat almost
every night after working long days at school," Washington
says. "I didn't have a savings account -- if I were to lose
my job, there would be no cash on hand."
After a visit to the Consumer
Credit Counseling Service of Maryland and Delaware Inc. last
year to set up a debt-management plan, she is well on her way to
having an emergency stash of cash and then some.
What did she do?
For starters, while she paid off loans and credit
card bills, she arranged to have $100 deducted from every paycheck
and deposited directly into a savings account. Then, she started
cooking large meals over the weekend for dinners throughout the
week -- which meant eating out only once a week.
Her sons also chip in on the savings plan by preparing
brown-bag lunches each night. To make some extra cash, they walk
dogs and wash cars on the weekends. Finally, the whole family has
kept a chart of the money saved, to plan for a trip to Disney World
at the end of the year. So far, they've saved $3,500.
"Not only was she able to decrease her debt but
she managed to start saving money at the same time," says Marilyn
Nall, a CCCS counselor.
Saving money is only the first step -- then you have
to hang on to it.
a money market account
Money market accounts provide a higher rate of return than a
regular savings account -- often more than double the interest rate
of a statement or passbook savings account. It's also a good choice
because of its restrictions on withdrawals and balances -- making
it less desirable for an individual to take out money.
Here's what money market accounts offer:
- Limited access to the money. Typically, an account
holder may be allowed up to six withdrawals per month, three of
them by check.
- If the owner exceeds the allotment, a bank often
will charge between $5 and $15 per withdrawal. Repeat offenders
may have their accounts closed.
- A basic account may require as little as $100 to
open. The minimum balance required to avoid fees averages between
$500 and $2,500.
The danger of having a money market account is the
temptation of tapping into that money once it starts accumulating.
Emergencies happen, but to prevent that cash from being chipped
away, earmark it for a specific goal. Also, avoid making exessive
withdrawals from the money market account because the over-the-limit
fees can quickly add up.
If you don't have enough money to open a money market
account, the tried and true savings account is another option. Some
banks and credit unions don't require a minimum deposit or minimum
balance. While the return on interest is much lower, there are fewer
fees and penalties for withdrawals.
Once you've opened that account, the next step is
deciding what to use that $6,000 for. Like your fingerprint, each
savings goal is unique. What may work for a recent college graduate
may not work for a family of four.
After that decision has been achieved, it's time to
start tracking the money flow. Buy a small notebook and, each day,
write down the amount of money you spend. This includes gas, that
double espresso latte, snacks from the vending machine and lunch
at that swank café. Each night, add up the total costs. Do this
for a week and total your expenses. By tracking the money for just
one week, you can see exactly where you can set limits and make
Regardless of your age, marital or family status, the following
DO list can help you start saving that $55.90 each week.
your lunch to work
Even though leftover spaghetti gets boring if you eat it every
week, try to cut back lunch outings to once or twice a week by alternating
leftovers with lunch outings. Depending on where you eat and how
often, some financial experts say you can save as much as $40 each
your loose change
That 50 cents for the Snickers bar: put it, along with your
pennies, dimes and nickels, into a large pickle jar or coffee can.
Make a habit of dropping change in the money bucket at the end of
each day. Roll the coins weekly and deposit them into your money
market account. Make it a family project.
you can, skip the dry cleaners and buy a bottle of Woolite
Dry cleaning bills can quickly add up, depending on the type
of career you have. Many shirts and slacks can be hand-washed in
a sink with Woolite or a similar product. Air dry the garments and
press with light starch.
the movie outings
Or at least limit how often you go. In New York City, the average
movie ticket costs $10. Try catching the flick during afternoon
matinees. Better yet, rent a video or two, pop some popcorn and
start a tradition with "weekly movie night."
a list before you go grocery shopping
Doing this prevents helter-skelter shopping and spending more
money than you want. Try to estimate how much money you want to
spend. Take a calculator to keep on track.
to have money deducted from your paycheck
If you get paid biweekly, arrange to have $111.80 deducted from
your paycheck (that's $55.90 twice each month) and transferred to
a money market account. If that's too much money, try starting with
a smaller amount and work your way up to $55.90 a week.
Some financial experts say that trying to save too
much will cause you to dip into your savings account just to make
ends meet -- that defeats the purpose of savings.
Remember, the key to making these mini-savers work
is to keep a running tally of how much you've saved and to always
put that money in your money market account. Emergency cash should
be kept in a separate savings account.
Finally, even if there is no specific goal in mind,
saving money should be as commonplace as breathing, say some financial
counselors. Not only does it provide a solid sense of security,
it establishes life-long budgeting habits.
-- Updated: April 2, 2004