I can’t tell you how many times I’ve heard these excuses:
- I can’t afford a Savings Account -
- I don’t make enough to save -
- There is nothing left at the end of the month -
- I don’t know how to get started -
- I’ll start saving next month, or next year, or just “later”, or even
- I don’t need to save, I have a good job, we’re doing just fine -
Well, the hard cold fact is that EVERYONE should have a Savings Account of “some kind”, “somewhere”. EVERYONE should have a Nest Egg to fall back on for that proverbial “Rainy Day”, and brother you never know when it will start raining. You never know when you may or may not end up on a Lay Off list at work, when your company will go broke, or get sold, or when someone in your immediate family will fall ill, or when you might have a car accident, or when a tree might fall on your house from the last storm. These things happen. We don’t plan them, and a lot of people don’t plan “for them”.
Saving isn’t an easy thing to do. It requires a certain amount of planning, diligence, restraint, budgeting, and yes a little bit of research wouldn’t hurt either, but it CAN and SHOULD be done!
OK, so you don’t make a ton of money - you’re not rolling in the dough! How do you get started when you can barely make the bills each month? It can be done. There are things you can do that can get you started. It may not, and most probably won’t get you rich overnight, but this isn’t a get rich kind of thing we’re talking about. Its a slow and steady way to create something that you can build up over time that may help you out in case of that emergency, or in case you want to buy something of substance that doesn’t immediately fit into your budget like a new car, or a house.
Everyone has a dream of some kind, maybe a long needed vacation, a dream car, or a boat, or whatever, but how do you get those things if you don’t have some kind of a plan? The answer is you don’t! So let’s start a plan so that someday you CAN take that trip to Bermuda, enjoy your first cruise, go fishing in Alaska, or drive that new convertible.
Its actually quite easy to get started. Everyone has, at some time in their lives, probably had a penny jar, right? Well it takes a lot of pennies to add up to anything, especially now in the 21st Century where there is no such thing as penny candy anymore, but if loose change is collected over time it will add up to SOMETHING. And if we do a lot of little “Somethings” and put them all together, we can end up with a nice pot in the end. So start by saving that spare change. When you come home for work at the end of the day, empty your pocket or purse of all that change and toss it into a bank of some kind. Now you’ll want to safeguard against the ability to be able to remove the money for treats, movies, cigarettes, or anything else. This has to be a SAFE place to put your change that will ONLY grow, and you won’t be able to dip into for any other reason.
When I was very young, I took a glass Mayonaise jar (at the time the largest kind of jar available in our house). I glued the lid onto the jar so that it couldn’t be opened. This immediately solved one problem - impulse “snitching” from the jar for that odd piece of candy or bubble gum. Also guarded against my younger sister, and cousins that might be tempted by the shiny coins. The lid was securely glued on so there was only one way to get my coins out without breaking the jar - well, not really, but the “other method” required a lot of time and patience, and it wasn’t easy (you don’t think I’m going to tell you do you???), so that took care of most of the “withdrawal” issues. Once the lid was securely glued shut, I took an ice pick (remember ice picks?) and jabbed the lid of the jar to create a slot large enough to drop coins into. Warning, be careful not to jab yourself with the ice pick - ouch!!! The punches from the ice pick created a jagged edge on the inside of the jar so the coins wouldn’t automatically, or easily fall through if the jar were turned over and shaken, so this was a nice kind of homemade piggy bank that couldn’t easily be broken into without some serious efforts.
Once you have your own piggy bank “secured”, and I do STRESS “SECURED” because you will be tempted to dip into it from time to time, which you don’t want to do. OK, you might WANT to, but you’re not going to - right? Now you have a means for starting your savings. Even if you only drop one coin a day it will begin to add up. And don’t mess with that jar until its full. Then go to your local bank, or stationery store and get some coin wrappers. You’ll be surprised how fast it will add up, and once you have your first jar full it will be enough to open a savings account with!
Now when starting a savings account you will want to compare the rates. It will vary from bank to bank, and if you have access to a credit union, you may even find something better. In addition to comparing those rates, don’t forget to look at how liquid your funds are. If you think you want something long term, you might look into “locking in” your funds for a period of time for a guaranteed higher rate, but most times that will require a “minimum deposit” or “minimum balance”. In the beginning you may not meet those minimum requirements, so just look for a good rate with no monthly fees attached. Make sure you check for those monthly fees. If you find a good interest rate, it can be easily overcome if the institution is going to charge you for having that account, so make sure your Savings account doesn’t have a monthly fee attached to it.
Once you are comfortable with dropping your coins, and you find you have adjusted your budget to allow for that without much discomfort, you can up the ante by saving $1.00 bills. I find that no matter where I go, not only do I get a pocketful of change, but I also get a purse full of $1.00 bills. If you do nothing more than fold up and drop your $1.00 bills into your piggy bank, you will be surprised how that will increase your savings quite quickly. If your budget is tight right now, then take out just one of your $1.00 bills and drop that one into your bank occasionally. Eventually you’ll be able to drop more, and your jar will fill quicker, but start with just one and see how you do with that. I think you’ll find that you won’t really miss it. How many times do you drive through and grab a hamburger and soda? How many times do you buy lunch out? Or grab a 6-pack at the liquor store. That $1.00 won’t make that much difference in your spending habits, but it can make a HUGE difference in your saving habits if you just tuck it away and forget about it. Now when THIS jar gets filled, you will be absolutely amazed at how much you have been able to save - so off you go to the bank again and deposit it into your account.
There are also a few tips on getting what I call FREE MONEY. Oh, you say nothing is FREE? Well, there are a couple of ways I’ve found to do exactly just that. I get offers in the mail quite frequently for new banks opening up. Or a local bank that opened up a new branch someplace else. Or maybe even your own bank that wants to promote a new program so they want people to come inside to check it out. The offers usually go like this: Refer a new customer to our bank, and we’ll give you $20 after they sign up. Or Open a Savings account with our bank and we’ll fund it with $50 after your third statement. Or refer a friend and they will get $20, and so will you if they sign up for our FREE checking account. I see these offers all the time. Now all you have to do is to go open a bank account, or refer a friend and they will deposit funds to your account and/or your friends account and the only obligation is typically the account has to stay open for 3-6 months. After which time you are free to take your funds out and close it. This is a nice way to help not only yourself, but your friend/spouse/family member also. I’ve opened an individual account with a minimum $20 deposit, referred “my husband” who also opened up an individual account and we’ve both benefited from the FREE CASH. Keep an eye on your snail mail, the junk fliers, etc. and you may see offers like this. They are legitimate and who knows , you may even want to keep the account once you have funds in it. Both brick and mortar, and online banks have these kinds of offers - you just have to know to look for them. You can even go into your bank and ASK THEM if they have any referral programs, or promotional offers for opening new accounts. You won’t know unless you ask, and a lot of them have the offers, they just don’t always market them openly.
And speaking of online banking. Its very easy to open up either an online NG Account, or Emigrant Direct bank account, and you’ll find they both pay much higher interest rates than any brick and mortar bank or credit union. In fact Emigrant Direct is a very old brick and mortar bank based in Manhattan New York, but the have a fairly new on online product (last few years or so) that pays very good rates. Funds are 100% liquid and you can attach it to your own bank account for deposits/withdrawals. Its also a great way of keeping the money a little farther away from your temptations to withdraw since you can’t just go to an ATM on your way home from work to get cash out. Its free to deposit and free to withdraw.
Now that you have a habit of saving your coins, and the occasional $1.00 bill, you can think of starting an automatic deposit to your Savings Account. Start with something simple like $1-5 per month. TRUST ME, you won’t miss it. If you can commit to $1-5 per month, you are on your way to something that can really make a difference. What you want to do is either quarterly, or bi-annually look at your budget and see how you’re doing. If you are in a comfortable position, and you think you can manage on what you’re doing, do yourself a favor, and up your automated savings by just a couple of dollars. Depending on your own situation, just a $1 increase may be advisable for you. But if you are in a little better position, up the amount by enough that you’re not making your budget too tight, but enough that will be an increase of some kind. I think if you do this on a regular basis, you will be amazed at how much your budget can actually allow without you even noticing too much of a change at all. Its not HOW MUCH you save, it HOW OFTEN YOU DO IT that will make the difference. If you do it regularly (that’s why I advise the automatic deposit), it will make a definite difference very quickly.
Your ultimate goal is to be able to save for that purchase and have the money to buy with cash instead of paying on a credit card. When you pay with credit, you are paying a higher rate because of the interest charged, so by paying cash, its like getting a discount right up front because not only are you NOT PAYING INTEREST you should be GETTING INTEREST on what you have in the bank. If you can figure out what you could afford by way of credit card payment, and put that much in your savings and then buy with cash, its much better in the long run. Why pay the bank when you could be paying yourself??? Just by paying cash instead of using a credit card you can save a lot of money. Go look at your credit card statements and look at how much you are already paying in interest. If that was going into your bank, instead of going to the credit card agency, and IF you were adding that to your balance and getting paid interest on it, how much of a difference would that alone make in your monthly budget?
One other thing to keep in mind, especially when making large purchases on anything that offers “timed payments”, or credit card purchases - - - remember that vendors will often give a discount if you pay WITH CASH, but only if YOU ASK FOR IT. If you charge something, they have to pay a fee to the credit card company for financing it, which you may know if you accept credit cards for services or products - there is always a fee involved. If you save the vendor that fee, they will often times pass the savings along to you. All you have to do is to ask - “Do you give discounts for CASH?” You’ll be surprised how many will offer you a lower price. More savings right up front just for the asking. But you have to KNOW to ask for it. They’re not insulted, they’re usually quite happy to give you a discount, and they may even consider that an “under the table sale” which saves them even more money if they don’t report it. So always ask. The worst thing that can happen is that they will say No, and you’re no worse off than if you hadn’t asked, but you might get lucky and get a discount, and that’s always a good thing! Now go home and put the money you just saved into your piggy bank. I mean after all, you WERE going to pay the marked price anyway weren’t you?
Another thing you can do is to pay yourself for some of your household “chores”. If you are out mowing your lawn - stop and think, what would I pay the neighbor kid to do this for me. Then instead of hiring a kid down the street to mow the lawn for $10 - continue mowing your lawn, then go put that $10 in your piggy bank. Look at the money you just saved my mowing your own lawn. OK, so maybe you wouldn’t have hired someone normally, but if you could afford it, you might have, so do yourself a favor and pay yourself for the job. You’ll probably do a better job than the kid would have anyways!
If your house needs a thorough Spring Cleaning (coming up pretty soon, right around the corner here), call your local Molly Maid service, and ask how much they charge for that - guaranteed minimum of $50 or up depending on the size of your house and what you want done. Then don’t hire them, do the cleaning yourself, but put aside that $50 (or even a small portion of it) into your piggy bank. If you’d pay your teenage neighbor $5 for doing your dishes, or raking leaves, or dusting your furniture, then put that $5 into your savings. Its a nice way of getting your chores done (which you have to do anyway - right?), and also paying yourself for doing it while at the same time increasing your savings account.
What I told my children when they were growing up and looking for their first apartment was that they had to have 6 months rent saved up or they couldn’t move out. That’s a good rule of thumb. You should have at least 6 months rent put aside somewhere in some kind of savings program to protect you against an emergency. Saving your nickels and dimes won’t get you there overnight, but its a beginning - and like my Dad always told us, “You wont win, if you’re not in the race!”. So get in the “Savings” race, and get started! Its more important than you think!
So even if you only start with coins, or $1 per month, you need to START. I KNOW you can afford $1 a month. And who knows, in 3-6 months when you look back at how you’ve done, you may find you can even afford $2? That’s the way you do it, slow and easy. Its really an easy pattern to follow, and what you really need is to get in the habit of doing it. So here is what you have to do to get started. Follow these simple steps in this order and see where it gets you.
- A penny at a time in the piggy bank
- All spare coins into the piggy bank
- $1 at a time occasionally dropped in
- All $1 bills into the piggy bank
- $1 a month commitment auto deposited in addition to the above
- Pay yourself for chores and add that to your savings
- Look for banks that offer free money for opening new accounts or referrals
- Ask your bank if they have referral programs
- Evaluate your monthly commitment on a 3-6 month basis and increase by very small amounts until you find what fits your budget
I can be done, its not impossible - it just takes time to get into new habits. So start now, its not hard. Write up this small list and put it in a predominantly visible location to remind you until it becomes second nature.
Another thing to remember is that you can always lower your commitment if you fall on hard times, or know a tight period is coming up. Just remember to LOWER it, NOT cancel it. Even if you have to drop all the way back to the $1 per month, keep that $1 per month going in. Eventually, you will be in a better position, then you can raise it again as your budget allows, just don’t ever stop completely.
And if you have children, encourage them to join in with their own savings. It will be a great way to prepare them for the day when they’ll have to manage their own budgets. Can you imagine what you’d have saved up, and the good habits you would have formed if you had started this as a child?
So start saving NOW. Go to your purse or dig into your pocket right now, and see what change you have in there. Even if its only an old penny, make your first “drop” into your piggy bank today! Then post back here and let me know how you’re doing, what’s working for you, what you find challenging, and what new ideas you’ve come up with to continue growing your savings.
Filed under:Personal Finances
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January 11th, 2008 |
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