Savings 101: Getting in the Habit of Saving and Where to Start

Brought to you by Your Money Line

Saving isn’t always easy. Knowing what savings goals to prioritize, or even just how to make savings a priority at all, can be tricky. Here are a few notes on savings from our partners at Your Money Line.

Get in the habit of saving.

The key to saving for an emergency is to make saving a habit. Cultivating a habit of saving will help build your savings overall and produce better financial habits for the future. A savings habit can be hard to start, but there are many tools and tricks you can use to make it easier, and even automated, in the long run.

• Pay yourself first. If you wait to see the amount of income you have left at the end of the month, you are a lot less likely to save. By determining the amount you want to save, and even putting it into your savings account, at the beginning of the month, you ensure at least some of your income gets put away for future expenses.
• Take advantage of your bank’s scheduled transfers. Most banks offer the ability to schedule transfers in advance. Use this tool to set aside a certain amount into your savings account each month so your bank can help build the habit for you.
• Decide which expenses are needs versus wants. Part of building the habit of saving is finding margin in your budget to put towards your savings account. Do you need to buy a coffee every morning or eat out for lunch every day? By reducing a few expenses that are “wants” and putting them into your savings account, you can save hundreds or even thousands of dollars each year.

The key to habit building is starting small. Every small amount saved counts, and even a small savings habit change can make a huge impact on your financial health. Once you’re in the habit of saving, you can start prioritizing key savings goals for the future.

Not sure where to start saving? Start with an emergency fund.

Your emergency savings should be your main priority. You should have three months of monthly expenses in your emergency fund. That seems like a lot of money to put aside just in case, but you’ll be thankful you did. In addition to the habits above, consider adding any bonuses, tax refunds or monetary gifts to your emergency fund to ensure you have a cushion in case an emergency hits.

As a Pension Fund member, you can save for an emergency even faster by utilizing their high-yield savings account, the Benefit Accumulation Account (BAA), to make your savings go even further.

Next, prioritize long-term savings to benefit from compound interest.

Once you have an emergency fund established, another goal to prioritize is long-term savings. The more you save now, the less you need to save later. Why? Compound interest. Compound interest is when you earn interest on both the money you’ve saved and the interest that money earned. Since compound interest includes interest accumulated in prior periods, it grows at an ever-accelerating rate. The long-term effect of compound interest on savings can help you reach your long-term financial goals sooner because your money grows much faster. You can take advantage of compounding interest with an individual retirement account, employer-sponsored retirement account or BAA through Pension Fund.

Building savings isn’t always easy, but the benefit to your financial well-being is worth it. By establishing the habit of saving, you do yourself the favor of protecting yourself from future financial hardship.

If you need help with budgeting or finding ways to create margin to meet your savings goals, the financial guides at Your Money Line are here to help. Visit our Your Money Line page to learn more.

Gifts by generous donors to Ministerial Relief and Assistance (MRA) make programs like Your Money Line possible. Learn more about MRA here.