Updated: Jul 5, 2022
Always pay yourself first!
Always pay yourself first. This is advice that I got years ago from a friend's dad. He told me, it's important to make saving a priority in your life, and to do it first thing at the beginning of the month. Usually, we think of saving money as something that we will do after we have all our other ducks in a row. The problem is, if we wait to have "extra" money, we are never going to start saving.
Years ago, my ex-husband and I were both tipped workers. So we would come home after work every night and put 10% of the tips into a jar for ourselves, and 10% into a jar for Atlantis. Just by doing this, without having a savings account, we saved up enough money to buy a business in two years.
That's right ladies, we saved up enough in TWO YEARS to buy our bar.
The trick is, there is no trick. Anyone can do this. Just make sure that your savings is the first thing you put money into. Of course, it is much easier now a days with linked checking and savings accounts, you can just have an automatic transfer set up for each time you get paid. Then, put your savings amount into your budget as a bill.
Set it and Forget it.
One of the important things when it comes to saving money, is to be consistent! If you only save money when you feel like you have extra money, then you are never going to have a savings.
Build your savings into your budget like a bill. Your first, and most important bill.
Whether you do a set amount, or a set percentage, saving will become a habit. Like with anything we do, building good habits when it comes to our money is very important.
Many savings accounts now a days have the option to set up automatic transfers from your savings account to your checking account. I have mine set up every paycheck now to set aside a certain amount by automatically transferring to savings.
There are also many different apps now that allow you to do the same thing. Some will have incentives for saving a certain amount of money, or saving for a certain amount of months in a row. This provides an added bonus for saving more money.
What Type of Savings Product Should I choose?
There are many different types of investment products out there and it seems like everyone gives you different advice. IRA? 401K? Life Insurance? Money Market Account? Stocks? Bonds?
There are advantages to each different type of savings plan. In many ways, it depends on what stage you are at in life what type of product will be best.
Things to ask yourself are:
Do you want the money to be available easily?
How much do you have to save?
How long until retirement?
Is there a big purchase that you are saving for?
Do you own a house?
The answers to these questions can help to determine what type of plan may be best for you. Remember, any type of interest bearing account will help you get more money up fast. That is the main reason why you would want to put your funds into a savings account instead of stuffing it under the bed like grandma.
Also, you know that old saying, "Don't put all your eggs into one basket." That applies here too. It is good to have several different savings plans into place.
High Interest Savings Account.
A high interest savings account is just like what it sounds like; a savings account with a higher than usual interest rate. These types of accounts may have additional restrictions that allow them to provide a higher interest rate. Some of the restrictions may be requiring a higher amount of money to open the account, or only allowing a certain amount of withdrawals per month.
According to Bankrate, currently Marcus and American Express have the top ranked high interest savings accounts. Both allow you to open an account for only $1, and have the top interest rates. Over time, the best savings products do change, so just make sure that you are comparing based on the interest rate, amount of monthly withdrawls, and the amount required to open the account when you are choosing a product.
I would highly recommend opening a high interest savings account as soon as possible, so you can maximize the earnings on your savings. Even if you only deposit a little bit of money each month, the higher interest rate will allow you to save more money more quickly.
In addition to paying costs for your dependents during end of life planning, there are types of life insurance that can be used as savings products as well. These are called Universal or Whole Life policies. Whereas a “term” life insurance policy will only be good for a certain amount of time (Usually 10 or 20 years) whole and universal life insurance policies don’t expire. They also allow you to build cash values, that can be taken out as a loan, or at retirement.
According to Forbes, “Universal life insurance is a type of permanent life insurance. It can cover you for the duration of your life, as long as the premiums are paid. Some forms of universal life insurance also offer a cash value component.
The cash value can build up investment gains (and sometimes get hit with losses, depending on the policy type).
You can take money out of cash value via a withdrawal or loan. The insurance company will reduce the payout to your beneficiaries by the amount of any withdrawals or outstanding loans if you pass away. But for some buyers, accessing cash value is more important than a full payout to beneficiaries later on.”
Since it builds up a cash value, the monthly payment for a whole or universal life insurance policy will be more expensive than the monthly payment for a term life insurance. So, depending on your long-term and short-term financial goals, you can look into one of these three types of life insurance.
There are many different types of retirement accounts, depending on your employer. You may be eligible for a 401K plan through your job, sometimes your employer will even match a certain percentage of your contribution.
If you don’t have an employment sponsored plan, you can also look into an IRA retirement account.
There are also different types of retirement accounts that are specific to government service, or to the military.
Whatever type of account you decide to get, it is a good idea to start your retirement account as soon as possible. That way, you can save up for as long as possible, and you may not need to save as much each month, since these are interest bearing accounts. If you deposit $10 per month for 20 years, you will earn more in interest than you do if you deposit $20 per month for 10 years. That is why it is important to start saving as soon as possible, even if you don’t have much to put aside.
For more information, check out this video!
How do you save money? 401K? College Fund? Retirement Savings? Let me know in the comments what your favorites are! Also, let me know if you want more details on any type of savings products.
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For financial advice specific to your financial situation, it may help to talk to your bank or a financial planner!