It’s no wonder so many Americans consider saving money their number-one financial struggle: Saving money consistently takes discipline and hard work.
In fact, a survey last year revealed that more than a quarter of Americans have no emergency savings whatsoever, and half have less than three months’ worth of expenses socked away.
So if you’re part of the minority and are putting money away regularly, congratulations—it’s an important part of laying the groundwork for a more secure financial future. But just because your balance is growing doesn’t mean there isn’t room for improvement in the way you save. At LearnVest, our financial planners recommend that most everyone have at least six months of net income saved up in an emergency fund, when possible.
Want to know some of the best practices for maximizing your savings account? We asked LearnVest Planning Services Certified Financial Planner™ David Blaylock to analyze five common savings strategies—and offer advice on how to work on adopting even better habits.
Strategy #1: “I Save What’s Left Over”
The risk with this: So you pay your bills, maybe make a few “fun” purchases too, then you transfer whatever is left over in your checking account to savings. The good news? You’re diligently trying to save.
The problem with this strategy is that when you leave money that’s earmarked for savings lying in your checking account, you may start thinking you have more money to spend than you actually should! “Because you feel more confident about your balance, you won’t mind going out and spending more,” Blaylock says.
It also may be harder to set savings goals for yourself because you probably never know how much money you’ll be able to sock away.
Try this instead: Pay yourself first. “The first bill you should pay every month is your savings bill,” Blaylock says. Of course, only take the “pay yourself first” approach if you still have funds available to cover your regular monthly bills.
How do you put this system in place? Simply create an automatic transfer from your checking account to your savings, either from every paycheck or at the beginning of the month. If you “set it and forget it,” you just might be shocked by how quickly your nest egg can grow.