Building a healthy savings account is a fundamental part of good financial management. Growing your savings will help you achieve your financial goals and help you feel more financially secure. Savings can also act as a safety net if you ever need cash to cover you in emergencies — i.e. if your home needs urgent repairs or if you have to fork out money for unexpected medical bills. Luckily, there are loads of creative ways to save more each month, without the need to make unwanted sacrifices. Here are some top money-saving tips to grow your savings.
Tip 1: Create a savings strategy
The first step to successful saving is to create a strategy. This will guide your spending decisions and encourage you to deposit more into your savings account each month. To create a savings strategy, you should start by comparing your incoming (salary) and your outgoing (expenses) funds each month. This should give you an accurate representation of how much you can afford to save each month.
For example, if your earnings are $3,000 after tax and your expenses total $2,000, then you should be able to deposit a minimum of $1,000 into your savings account each month. If you are saving for something specific like a house down payment, then adjust your savings strategy to help you reach your savings goal faster. So, if you want to save $18,000 in 12 months, then you would need to reduce your monthly expenses to save $1,500 a month.
Tip 2: Automate your savings
Automating your savings deposits is one of the easiest ways to build your savings faster. According to nerdwallet.com, setting up an automatic transfer will take the stress out of savings and help you get into the habit of spending less than you make. Financial experts recommend depositing money into a separate savings account at the start of each month before you have paid any bills or utilities. That way, you will be much more likely to stick with your budget and make smart spending decisions.
Tip 3: Cut unnecessary costs
Identifying and reducing unnecessary costs is another important step towards growing your savings. Small adjustments to your spending habits can bring about big results and help you boost your savings faster. Some simple ways to cut your expenses may include making meals at home, setting a monthly shopping limit, selling unused items, and canceling recurring bills such as a Netflix subscription.
Tip 4: Don’t forget to create an emergency fund
Many people save for a large purchase such as a luxury vacation or a house down payment. However, you must not forget to also build an emergency fund. This money can be used to cover you in financial emergencies if you lose your job, have to pay for expensive vehicle repairs, or require urgent medical treatment. Experts at A.C. Waring & Associates recommend that “you should have between 3 and 8 months’ worth of savings to cover you in the event of an emergency.”