5 tricks to sweeten your savings a little at a time

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Build savings over the long term
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Build savings over the long term | stockphoto mania/

Build savings over the long term

Are you an average saver, or is saving a bigger life priority? The average saver puts away around 5 percent of their income, but bumping that up just a little could go a long way in helping you reach your long-term goals.

According to the Bureau of Economic Analysis, 5.5 percent represented the average savings of Americans in November 2016. If you're saving for retirement or another long-term goal, increasing your savings by as little as 1 percent can make a noticeable difference.

A 2015 "America Saves" poll by Fidelity Investments found that many people underestimate the value of saving an extra $50 per month over a 25-year period, which Fidelity says could accumulate to more than $40,000 because of the impact of compound interest and potential market growth.

"The value of time is the most important factor because even if you start saving in your 40s or 50s, you can never make up for lost time," says Sacha Millstone, a wealth manager at Raymond James & Associates in Denver and Washington, D.C. "Saving even a small amount in your 20s will ultimately have a big impact on you in your 50s and 60s because your money will have time to accumulate and grow."

Here are five strategies you can use to build your savings account in little ways.

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Start saving in your 20s

Start saving in your 20s | Jacob Lund/

John Rosenfeld, head of everyday banking at Citizens Bank in Boston, says people think they will save more once they make more money, but he says the best way to save up is to start early and develop the discipline to save more whenever you can.

"The key thing, particularly for young people, is that making even a little progress toward saving money today can make a significant difference 35 years from now," says John Sweeney, executive vice president of retirement and investing strategies at Fidelity Investments in Boston.

"Ideally, you're saving 10 percent to 15 percent of your income because young people today need to be prepared to fund their own retirement and to live longer," Sweeney says.

Save 1 percent of your earnings monthly

Save 1 percent of your earnings monthly | Alena Ozerova/

For a household earning $60,000 per year, 1 percent equals $50 per month. Setting aside a small, incremental amount of your earnings will help you slowly build savings. One way to do that is to trick yourself by budgeting less than what you really earn.

"If you've recently started your first job, it's a great idea to budget as if you're earning just 85 cents on the dollar and put away the rest," Sweeney says.

Here are some suggestions from Fidelity to find the cash to achieve an incrementally higher savings rate:

  • Share baby-sitting duties with friends instead of paying a sitter.
  • Turn off your lights and appliances to lower your electric bill.
  • Take advantage of coupons, as well as senior, student or veterans discounts.
  • Plan a "staycation," or vacation in the offseason.
  • Allocate your savings on a loan refinance into your retirement account.
  • Sign up for employee perks such as pretax public transportation programs or a health savings account.
  • Put yourself on a cash allowance, especially if you're prone to impulse buys.

Every time you spend a little less, make sure you put that extra money into your savings account.

Go automatic with paycheck deduction

Go automatic with paycheck deduction | Pressmaster/

The best thing you can do is "go automatic" by having part of your paycheck automatically deducted into a savings account, or setting up a regular transfer of funds, Rosenfeld says.

"Putting aside money in a 401(k) is even easier because those are pretax dollars that you never see," Rosenfeld says.

Finding extra money in your budget to dedicate to saving even more can be difficult, but the majority of those polled by Fidelity say they would be willing to "make minor sacrifices to improve their chances for a better tomorrow."

For example, 81 percent would be willing to take lunch to work once a week if it would allow them to eat dinner at a restaurant one evening a week in retirement. And 72 percent said they would be willing to give up going to the movies one night each month if the savings could pay for cable TV every month in retirement.

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Contribute to a retirement account

Contribute to a retirement account | Liderina/

"If your employer has a 401(k) or a similar plan and makes matching contributions, then you should absolutely contribute to the limit so that you can claim your full match. Otherwise, you are leaving money on the table," Millstone says.

Millstone says that for most young people, a Roth IRA or Roth 401(k) makes the most sense for retirement savings because the money will never be taxed again after being placed in the account.

"Even if you don't have a company-sponsored retirement account, you can open your own IRA," Millstone says.

"One key element to the equation in retirement savings is how you allocate your investments," Sweeney says. "You need to assume some risk and exposure to stocks in order to grow your savings. For young people, 90 percent of their money should be in stocks, but when you're closer to 65, you should allocate more of your money to fixed-income investments."

Long-term saving, not for retirement

Long-term saving, not for retirement | bbernard/

If you're saving for another long-term purpose other than retirement, Rosenfeld suggests a certificate of deposit or just a separate money market account or savings account, primarily to compartmentalize the money so you don't spend it.

Sweeney says savers who make regular contributions on a weekly or biweekly basis toward their long-term goals can avoid the pain of coming up with a large sum at the end of each month or, worse, at the end of the year.

Setting up an automatic system and periodically increasing the savings amount, even by as little as 1 percent, is the easiest way to reap future rewards.

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