This year, America Saves Week runs from February 25 until March 2. America Saves is an initiative of the Consumer Federation of America involving non-profit, government, and corporate groups that encourages individuals and families to save money and build personal wealth. Unfortunately, Americans started saving less in 2018 and their saving rate is only forecasted to continue falling in 2019. If you’ve been finding it more difficult to save lately, you aren’t the only one.
According to Trading Economics, the household savings rate in the U.S. fell from a high of 7.4 percent in February 2018 to just 6 percent in December 2018. This disturbing trend is present in more than just average savings rates. A January 2019 Motley Fool publication revealed that a whopping 60 percent of Americans don’t even have enough emergency savings to cover an unexpected $1,000 expense.
Step Up Your Savings
During this year’s America Saves Week, we want you to break these trends and avoid being part of the majority of Americans that don’t have enough in their savings account. Here are some tips for increasing your savings, no matter where you are in your financial journey:
If you haven’t started saving…
Households who aren’t saving consistently usually have one of two problems… or both.
- Every penny of income is spoken for, so you have nothing left to save.
- You have no savings, so it seems daunting to save up anything since you’re starting from zero.
If you simply don’t have anything to save because you’re spending everything you make then you have a budget problem. Even without the issue of not saving, you can’t expect to maintain financial stability if you’re one unexpected expense away from financial distress. You have to take action to fix your budget and get debt under control, so you can start saving.
In this case, your first step should be a call to speak with a certified credit counselor. During the free consultation they will review your budget to see what’s holding you back, along with reviewing your debts to see if consolidation could help you get your budget back into balance. One free call can help you rein in overspending and see if you qualify for a debt management program that may reduce total monthly credit card payments by 30-50 percent.
Then the money you save from reduced debt payments can be used to start saving. If it’s the second reason above holding you back at this point then it’s all mental. Just get started. Having $5 in savings is better than none, then $10 is better than $5. Once you start building it will be easier to maintain momentum.
If you started saving recently…
Building a financial safety net for your household takes time, so see where you are in achieving that basic level of savings. Your net should be able to cover 3-6 months of bills and necessary budget expenses like groceries and gas.
With that in mind, see how much you have and compare that to what you need to have. Can you save the difference before the end of the year with your current monthly savings? If not, can you increase savings for the next 11 months to reach your goal? Also keep in mind that most Americans will be receiving a tax refund in the next few months. Putting it into savings is a good use for that money.
You may also want to take this week to look at different savings tools that will help your money grow faster. If all of your savings is sitting in a basic savings account, chances are good that the rate applied to the money is hardly going to help it grow effectively.
Instead, look into moving all or some of your savings to an account with a higher APY (annual percentage yield) or one that compounds faster. Money Market Accounts often have better rates but require a large deposit. The money from your financial safety net may be enough to make this kind of account a good option for you. You can also consider CDs that can mature anywhere from six months to a few years.
If you’ve been saving for a while…
If you’ve been saving long enough that your financial safety is in place already, then you should really be saving up for either something specific, so you can avoid taking on debt, or because you want to build money for new investments.
In the first case, you’re planning ahead so you can use savings to strategically avoid generating debt from things that usually require using credit. This can be anything from taking a vacation this year to generating a larger down payment for your next car. Look at your life and think about what you may need in the next 11 months. Start saving now for each specific goal and you can pay for all or part of those big expenses in cash.
The second part is what many people find intimidating. We know – the idea of investing can be scary if you’ve never done it. However, since you have healthy savings already and are simply looking to improve on an already stable financial situation, you’re in a good place to jump in in spite of the risk. Start small if you must, with safer investments like CDs and bonds, then work your way up.
As you start to get familiar with investments, also take time to review your retirement accounts. These are usually mutual funds that allow you to invest your money over a range of high and low-risk investments. This can be a good way to get familiar with how investing works and will help you be more effective at saving for retirement. If you have questions reach out to a financial adviser to get help. Don’t let lack of knowledge or fear of the unknown keep you from taking action that can improve your life.
Controlling Your Spending
Of course, one of the first steps of saving is reigning in your spending. This week, follow some of Consolidated Credit’s tips for halting credit card spending:
One of the tricks to stop using credit for a week is to rely solely on cash. Consumers can take their credit cards out of their wallets and replace them with the cash amount needed to survive for a week. This way when consumers go shopping, they don’t overspend.
Hide credit cards
For some consumers, it’s just too hard to say bye to their plastic, even if it’s only for a week. For these consumers hiding credit cards in an out-of-sight cabinet or drawer can be the solution. By keeping credit cards out of reach, consumers are more likely to control their spending habits and avoid making large purchases.
Set up automatic bill payments
Some consumers pay several bills with their credit card without realizing how much debt they are accruing. By setting automatic bill payments from their checking account, consumers can pay all their bills on time without facing interest rates or late fees.
Eat at home
Eating out is one of the most common credit card expenses among consumers. Instead of swiping their plastics in six or seven different restaurants each month, consumers can eat healthier and save money by preparing their own meals. It’s estimated that a family can save up to $2,784 per year by cooking at home.
Money saving challenge
A fast way to start depending less on a credit card is trying the 52-week Money Saving Challenge. This fun strategy involves saving $1 every week and adding $1 each week for a year. In a year, over $1,300 can be saved without making huge sacrifices!