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Oct. 12 is National Savings Day, which can be a great time to reflect on your strategies for saving money for emergencies, retirement and other financial goals. In fact, having a nest egg can be a lifesaver at a time when inflation and economic uncertainty are still at play and more than half of Americans say money negatively impacts their mental health.
Now is an especially good time to beef up your savings because competitive savings account rates have surpassed 5 percent, which is around 10 times greater than they were earning just two years ago. What’s more, high-yield savings account rates are now outpacing the rate of inflation for the first time since 2020.
Whether you’re a seasoned saver, or one who’s just starting to set money aside, here are some practical ways you can start to increase your savings today.
1. Set up a budget
A budget is a spending plan that reflects your monthly income and expenses. It lists the amount you’re paid as well as how much you’re devoting to all your expenses, such as housing, food, transportation, utilities and discretionary spending.
The idea of budgeting may seem overwhelming to anyone who doesn’t already have a budget in place. If you think budgeting is too difficult or takes too much time, you’ll find you can actually set up a basic budget in a few simple steps:
- Choose your method: Create a spreadsheet, download a budgeting app or grab a pencil and paper.
- List your monthly income: This should include what you earn from your day job as well as anything additional from side hustles or other sources.
- List each of your expenses: Common expenses include rent or mortgage, car payments, gas, food, utilities, credit card payments, student loan payments and discretionary spending.
- Add up your income and expenses: This important step can help you to make necessary changes to your spending, and it shows what’s left over for priorities such as savings or debt repayment.
“Avoid getting bogged down in too much detail,” says Bruce McClary, spokesperson for the National Foundation for Credit Counseling (NFCC). “There’s no need to use a microscope and manage every penny as you get started with a budget. Start by considering your spending categories, like food, housing, and transportation. Once you have a clear picture of those, you can start to add in smaller categories.”
A benefit of having a budget is you’ll be able to identify areas relatively easily where you can reduce spending to boost savings.
2. Cut spending
When it comes to increasing savings, some find this easier to accomplish by cutting spending than by finding ways to earn more income. Either way, it can pay to comb through your budget and identify areas where you can bring down your spending. Line items where you can make the biggest impact include:
- Food: Cut back on pricey restaurant food by preparing more of your meals at home. It can pay to make a meal plan and a shopping list before hitting the grocery store. You can also save money (and work) by preparing larger meals that provide leftovers.
- Gas: If you’re allowed to work from home some days of the week, doing so can save you a bundle on gas. If you drive to work, reduce the expense by carpooling, when possible.
- Insurance: You might be able to save hundreds each year by finding a more affordable provider for your auto, homeowners or renters insurance. Call around to receive quotes on coverage that matches what you’re getting now.
In addition to such significant expenses, you’ll likely be able to cut smaller components from your budget that can make a considerable impact over time. Examples include:
- Unused subscriptions: A look through your credit card bill is bound to bring up at least one item you’re paying for that you’re not using. Examples may include gym memberships, streaming services or other monthly subscriptions.
- Impulse purchases: As a rule, wait a set amount of time (such as 24 hours) before buying any item that grabs your attention. Chances are, you’ll decide you’d rather not spend the money after some time has passed. Avoid temptation by turning off promotional messages from retailers to your email or smartphone.
- Energy costs: You can save on electricity each month by installing dimmer switches and replacing your existing incandescent or halogen bulbs with LED ones. You can save on heating and cooling by programming your thermostat to account for any stretches of time each day when no one’s home.
3. Increase your income
A side hustle is a way of earning money in addition to your day job, and the best side hustle often involves work you’re skilled at and which you enjoy. Nearly two in five U.S. adults have a side hustle, according to a recent Bankrate survey, which found that 25 percent of side hustlers put the extra money into savings.
If you have a side hustle and don’t need the extra money to pay your bills, consider devoting the money to savings. This can help you grow your savings quickly, whether it’s for your emergency fund or other goals such as a down payment on a home or a big vacation.
If you already have an emergency fund in place that could cover three to six months’ worth of living expenses, consider using the extra money to pay down any debt. Paying more than just the minimum amount on a credit card balance or a student loan helps you to shave off interest and to eliminate the debt sooner.
4. Establish savings goals
Having savings goals can be an effective way to help you save money every month. To set up such goals, decide what things you want to save for, and then determine how much money you plan to devote to each of these goals regularly.
“Once you have a goal in mind, you’ll be more motivated to save,” says the NFCC’s McClary. “What do you want to save money for? A down payment on a house? Retirement?”
Things people commonly save for include:
- An emergency fund
- A down payment on a house
- A planned vacation
- A child’s college education
When it comes to savings goals, an emergency fund should be top priority. “When the bulk of your income is going toward taking care of essential bills and everyday expenses, it can be tempting to put off saving for emergencies until you have ‘extra’ money coming in,” says Amy Maliga, a financial educator with the nonprofit credit counseling agency Take Charge America. “But everyone, regardless of age or income level, should have money set aside for emergencies.”
Even having a small amount saved for emergencies can really help in a pinch. “While saving enough to cover three to six months of living expenses should be your ultimate goal, even having $500 set aside in savings can help you when a true emergency expense comes up,” Maliga says.
5. Open a high-yield savings account
Whether you’re saving for emergencies or for your dream vacation, a high-yield savings account is a good place to stash your funds. These accounts currently pay a competitive rate of return that’s outpacing the rate of inflation. What’s more, they provide quick and easy access to your money if you need it in a pinch.
The best high-yield savings accounts are often found at online-only banks, which tend to pay competitive rates and charge little-to-no fees. By contrast, brick-and-mortar banks tend to offer rock-bottom rates.
If you prefer to keep your emergency money separate from funds set aside for other goals, consider setting up multiple bank accounts. An alternative is using a single account that allows you to set up savings categories, or buckets. Examples include:
- Ally Bank: Ally Bank offers a savings account that lets you establish up to 30 savings buckets and assign a name to each.
- NBKC Bank: The Everything Account offered by NBKC Bank offers the ability to set savings goals and follow how you’re tracking on them.
One way to avoid being tempted to spend extra money in your checking account on impulse buys is to automate your savings. “Set up a recurring transfer from your checking account to your savings account each month,” says the NFCC’s McClary. “This way, you’ll be saving money without even having to think about it.”
National Savings Day is a good time to find ways to boost your savings through budgeting, reducing expenses, increasing income, setting savings goals and making sure your nest egg is in a high-yield account. Whether you’ve been saving diligently for years or are just starting out, smart savings habits will help you meet your financial goals.