While most people realize monetary savings are important, more than half of adults in America reported having less than $1,000 squirreled away in 2017. As many as 39 percent -- that's over a third -- said they had nothing saved. The economic climate for many people hasn't led to extreme savings, but putting aside just a little for that inevitable rainy day can make a huge difference in your stress level and future monetary woes. Here's a look at why you should start saving and how to get into the habit.
Why Is Personal Savings So Important?
One major reason to save is for retirement. If you're planning to retire at age 67, most money management experts say to plan on building a retirement fund equal to about 10 times your annual salary or more. That helps you supplement other forms of retirement income and live a comfortable lifestyle as you age.
Aside from retirement savings, which you can accomplish through 401(k) designations and other investments, it's a good idea to create emergency savings funds. Certificates and other financial vehicles can provide stable ways to grow your personal savings, but remember to keep some money accessible in savings accounts for use in emergency situations. Here are three reasons to start a personal savings account today.
- Saved money is money that can grow. Money that you set aside for future use usually earns some type of interest. Savings accounts don't generate extremely high levels of interest, but they're a great way to put your money to work in a low-risk way.
- More financial control. When you have money on hand to cover expenses or make purchases, you have more financial control over your entire life. You don't have to rely on someone else to loan the funds or worry about interest, and you can negotiate confidently to get the best deal on purchases.
- Ability to cover emergency needs. Perhaps the top reason to save is for peace of mind. A healthy savings account means you don't have to worry about the bill for minor medical mishaps, car repairs or home appliance issues; you have the money to take care of the problem right away.
How Can You Kickstart a Personal Savings Habit?
One thing that keeps people from successfully launching a regular savings habit is goals that are unrealistic. While saving is important, you can't create goals that don't align with your overall budget -- sacrificing eating right for saving isn't a good plan, for example.
Since most experts recommend an emergency savings fund of $1,000, start with that goal. That's only $20 a week if you want to reach the goal within a year. Want to get there in six months? You only need to save $5.50 a day. Many times, you can carve these amounts out of your budget by making simple decisions such as packing your own lunch instead of eating out, replacing a more expensive home-cooked dinner with less costly but hearty options like soup or spaghetti, and skipping an unnecessary expenditure once a month.
Here are a few other tips for kickstarting your savings.
- Open a savings account. Cash in a piggy bank is too easy to raid when you get a craving for coffee, pizza or a new pair of shoes.
- Keep your savings separate from your checking so you don't have debit access to it.
- Create a whiteboard or paper wall tracker so the entire family can get in on saving and celebrate when milestones are met.