Saving money is currently top of mind for many consumers, as inflation rages at a 40-year high and recession fears have some wondering what’s in store for their finances in the near future. And with Oct. 12 being National Savings Day, it’s a great time to reflect on building your nest egg to help weather any financial storms that may come your way.
Increasing your savings can provide the peace of mind that you’ll have the funds to cover the unexpected, whether it’s a medical emergency or sudden job loss. It can also ensure you’ll have the money to meet your financial goals. Here we’ll go over some essential strategies that can help you kickstart your savings today.
1. Open a high-yield savings account
Many large brick-and-mortar banks offer savings accounts that pay a rock-bottom annual percentage yield (APY) of 0.01 percent. You’ll often find much higher rates, however, at online banks and some credit unions. High-yield savings accounts currently pay APYs of up to 3 percent, for instance. Depending on your savings balance, the difference in interest earnings could be hundreds of dollars per year.
Adults spend an average of only two-and-a-half hours researching the best savings vehicles for their financial goals, a recent Capital One survey found.
Here’s how that compares to other common activities, according to the survey:
- Time spent researching the best savings accounts: 2.48 hours
- Time spent drafting a fantasy football team: 3.22 hours
- Time spent holiday shopping: 6.34 hours
- Time spent on weekly household chores: 6.19 hours
Some savers are reluctant to close low-yielding brick-and-mortar bank accounts where they’ve had their money for many years. If you want to hold onto such accounts, you can still take advantage of higher rates by opening up a separate, high-yield savings account elsewhere and funneling some of your savings there.
2. Reduce everyday expenses
The increasing price of everyday essentials has affected everything from the cost of gas and groceries to rent, utilities and insurance. Your wallet has undoubtedly taken a big hit, yet there are several practical ways you can bring down your daily expenses:
- Cook at home: Time devoted to planning, shopping for and preparing your meals is well spent since it’ll cost you a fraction of what you’d pay on restaurant food.
- Find sales and buy generic: Plan your meals around what meats, fruits and vegetables are on sale in a given week. Don’t be afraid to switch from brand names to generic items; you can always switch back if a generic product doesn’t meet your standards.
- Find the best gas prices: Download an app like GasBuddy or Gas Guru to find the lowest prices at the pump in your area. You may also want to consider joining a loyalty program that rewards you for filling up at certain gas stations.
- Cancel unnecessary subscriptions: Look at your recurring monthly bills and cancel anything you don’t need or use. This can include everything from streaming services to gym memberships.
- Cut the cord: It may be worth canceling cable if you’re paying for many channels you never watch. Services that offer a la carte channels — such as Sling or fuboTV — can be a cheaper way to watch your favorite shows.
- Avoid impulse buys: If you have the urge to purchase a new item, wait a couple of days before pulling the trigger. You might realize the stress of having to pay for the item outweighs any benefits it would bring.
Following a budget can help you monitor your everyday spending and reduce costs significantly. You can make your budget using an electronic spreadsheet, pencil and paper or a handy budgeting app. Devote line items to all of your expenses, including housing, transportation, food, utilities and entertainment. Leftover money can go toward savings or debt repayment.
3. Boost your income
In addition to cutting daily expenses, you may be able to pad your savings more by finding ways to increase how much money you bring in. For instance, an activity you enjoy can make for a lucrative side hustle — such as making videos, cooking, tutoring, dog-walking, sewing, yard work or fixing things. A side hustle is work you do in addition to your primary job, and it can be done during evenings, on weekends or whenever you have spare time.
Another way of boosting your income is by negotiating a pay raise at work. When doing so, be sure to arm yourself with successful performance metrics or other information to back up your request. If you’re considering switching jobs to make more money, data shows that this may be your means of seeing the biggest pay gains.
4. Increase debt repayment
The sooner you pay down your mortgage, student loans or credit cards, the less you’ll end up paying in interest for each of these. Paying off debt can save you thousands of dollars in the long run, and the freed-up money can go toward your emergency fund or other goals such as travel, a new vehicle or a child’s education.
Methods of debt repayment include:
- The debt snowball: This builds momentum by paying off your debts from the smallest to the largest balance. As you eliminate more and more debts, you’ll increase the amount you can pay to the remaining ones.
- The debt avalanche: This prioritizes debts in order of interest rate, so you’ll pay off the debts with the higher rates before the lower ones. This can save you a lot in interest, which in turn helps you eliminate your debts more quickly.
- Debt consolidation: Combining some or all of your debts into one can help when it’s hard to keep up with various payments and due dates. Debt consolidation can be accomplished by taking out a personal loan or a balance transfer credit card.
5. Automate your savings
Funneling money into a high-yield savings account can be made easier when you automate your savings. One way to accomplish this is setting up a percentage of each direct deposit to go automatically to your savings account. This ensures money is funneled to your savings regularly, and chances are you won’t miss it all that much each paycheck.
Another way to put your savings on autopilot is to do recurring transfers from your checking to your savings account. Banks that offer this service usually allow you to set it up through their website or mobile app.
Bottom line
There’s no time like National Savings Day to think about ways to increase your nest egg and improve your overall finances. The best ways to start often include opening and regularly funding a high-yield savings account, paying down debt, and finding ways to cut costs on everyday expenses. Following a basic budget may be key in getting your spending under control, saving toward your goals and building up your emergency fund.