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Smart saving strategies

If you’re not sure where to start, consider these options and consult with your credit union, employer or financial institution to learn more about the options available to fit your unique lifestyle and savings goals.

Photo by Fabian Blank from Unsplash.com

Money management and building long-term financial health is a careful balancing act between long- and short-term financial needs, and now is a perfect opportunity to re-examine your goals. People sometimes focus on short-term needs, making sure they can cover routine bills and living essentials. However, many people do not have the resources to cover an unexpected expense, much less save for the future.

Data from the U.S. Financial Health Pulse shows that many people are savings-constrained, over-indebted and underinsured. In fact, despite it being the longest period of economic expansion in modern times, 79% are not financially healthy, and many live paycheck to paycheck just to cover bills, rent and basic living expenses.

As a result, 60% of households are unprepared for a financial shock, with 41% unable to cover an unexpected $400 expense without borrowing money or selling a personal item. This makes saving incredibly challenging, especially for many low-income households.

“The data makes it quite clear that a significant segment… is struggling to create a meaningful savings account, whether it’s intended as an emergency fund or a means of attaining a goal without incurring debt,” said Deborah Winshel, global head of social impact at BlackRock.

As with any financial matter, there’s no one “right” way to save. Individual circumstances require a customized approach to determine the best method to fit needs.

If you’re not sure where to start, consider these options and consult with your credit union, employer or financial institution to learn more about the options available to fit your unique lifestyle and savings goals.

Automated Savings
Often offered as an option through employer payroll, this approach allows you to designate a portion of your paycheck to be deposited in a savings account. Whether you choose to make it a flat amount or percentage of your income, it’s an easy method that allows you to consistently funnel money into savings with a one-time setup process.

Round Up
Some financial institutions offer programs in which every transaction you make on your account, or perhaps just those made using your debit card, are rounded up to the nearest whole dollar. The difference between that whole dollar amount and your actual purchase amount is then directed into your savings account.

Prize-Linked Savings
Marrying the fun of winning prizes and a savings account, this type of program incentivizes personal saving by offering an on-going, risk-free chance to win a prize, such as additional cash, by making savings account deposits. Promising both security and opportunity (and perhaps some fun), the amount deposited by the account holder is never at risk, unlike lotteries and games of chance.

Windfall Moments
When you receive a substantial amount of money from a source like a tax refund or a work bonus, it can be tempting to splurge on immediate needs or something fun, like a vacation. Allowing yourself to enjoy a portion of the money isn’t a bad idea, but you can also take advantage of the unplanned income as an opportunity to launch, or grow, your savings account.

Collective Savings
Accountability is a common barrier to better saving habits, but when others are counting on you to contribute your share, there’s a greater level of responsibility at play. A collective savings account may be a good solution for a shared goal like a trip, special project or funding a special event for a loved one.

To learn more about the savings problem and some of the work being done to help employees, customers, gig workers and students take essential steps toward long-term financial well-being, visit savingsproject.org.

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