How to trick yourself into building your savings account
If you’re not used to saving money, it can feel pointless. There’s just too much stuff to buy to let your money grow mold in the bank. Why put your cash in a savings account when you could liberate it from its Wells Fargo shackles and let it run wild?!Â
We tapped our favorite financial guru, Nicole Reyes, to find out the secret behind saving cash. Nicole is the co-founder and head of product atÂ Grand, a startup that lets you winÂ theirÂ cash just by savingÂ your ownÂ cash. We got her to tell us why we should bother to save, and how to get started. Here it goes.
Having a financial safety net in place is rare these days. 62% of Americans have less than $1,000 saved and 47% of Americans are unable to cover an unexpected expense of $400 dollars out-of-pocket without borrowing money or selling something.
Companies and brands are making it increasingly easier to spend money and harder to save. Store credit cards are incentivized with substantial savings opportunities and are aggressively pushed to consumers during checkout. Debt has become commonplace in most households, but aÂ credit card is not an equal alternative to a savings account.
Debt has a cost, requires monthly monitoring and payments and can impact your credit score if you get those payments wrong or spend too much.Â Starting the year off strong and putting some savings away make it possible to weather lifeâ€™s â€œlittle stormsâ€ without needing to take on additional credit card debt or other loans.
What is the simplest way create an emergency savings fund and bounce back from holiday spending? Start small and aim big by following four easy steps.
1. Figure Out How Much You Need to Save
Your emergency fund should be enough to cover your regular expenses for three to six months. Monthly expenses will vary wildly per individual but likely include rent/mortgage, car/transportation, electricity, water, cell phone(s), and your monthly food spend.
2. Set Up a Specific Account for Emergency Savings
These funds should be saved be in a separate account. It will allow you to easily set up an automatic contribution and it creates an additional barrier to removing the funds from the account. A separate account also makes it easier to track your progress over time. Look for accounts that provide extra benefits â€” i.e. a high interest rate or a rewards account (one that offers points, cash, additional products, etc.) â€“ that will give you more bang for every buckÂ saved.
3. Automate Your Inflows
The easiest way to make sure you continue to make progress is to automate your contributions. This can be as easy as linking your new savings account to your checking account and creating a monthly transfer. Better yet, you can designate a portion of your income to be directly deposited into your emergency savings account. Consistency,Â even with small deposits,Â is the best way to grow this balance. There are new tools in the financial technology space includingÂ Grand that will even do the work for you by analyzing your income against your typical spending andÂ automaticallyÂ saving what you can afford.
4. Keep it Fun!
Getting excited will help keep you engaged and motivated throughout the process, making it exponentially more likely thatÂ youâ€™ll hit your goal. To get on the fast track to creating an emergency savings account, you can set an aggressive timeline, participate in a challenge with friends or set an even bigger number goal than the one you previously estimated needing.
Your emergency savings will serve as the foundation of your financialÂ wellness. From here, you can start set your sights on higher financial goals like investing, planning your retirement, making new purchases and upgrades â€“ whether that means getting a faster car or a new house with a bigger backyard. Plus, once youâ€™ve created your financial safety net, youâ€™ll have peace of mind knowing you are prepared for anything that comes your way.