According to a recent survey from ING Group International Surveys , 27% of Americans have no money saved at all. That means more than a quarter of all Americans have nothing set aside for a rainy day, haven't saved up any cash for big purchases, and aren't saving for their senior years.
Saving money can seem hard when you have lots of pressing financial obligations -- but it's something everyone needs to do in order to achieve any financial security. If you're not sure how to get started, read on for some tips on how you can begin putting aside money for the future.
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Why is it important to start saving today?
Saving money isn't something that can wait, as there are lots of reasons why you need to have money set aside right now. Here are a few big reasons why it's such a problem if you don't save and why you need to start today.
- Saving is essential to keep you out of debt. Absolutely no one is immune from emergencies and unexpected expenses. If you have money saved in an emergency fund , you can cover surprise costs when they come up. If you don't have any cash saved and need some quickly to deal with a problem, chances are good you'll have to go into debt. This could mean putting money on a credit card at a high interest rate or, worse, taking out a payday or car title loan. Once you're in debt, it's much harder to get out and stay out, since a good portion of your income will have to go toward interest. The only way to avoid this fate is to save for emergencies.
- Saving helps you enjoy life. Chances are likely you can't pay for a vacation or other big purchases with just one weekly paycheck. But if you set aside a little bit from each paycheck, you can save to do the fun things you've been dreaming of. You can save up to take your family on a trip or to splurge on something you really want without having to go into debt to buy it.
- Saving helps you prepare for retirement. Living on Social Security alone isn't possible , and most people don't have guaranteed-income pensions from employers. It's up to you to make sure you aren't broke as a senior. The sooner you start saving, the less you have to actually put aside each month to have a good-sized nest egg. So you'll actually make saving for retirement a lot easier if you start right now.
- Saving helps you build your net worth. When you save money for a down payment for a house, you can start building equity and growing your wealth. When you save and invest, your money can start earning interest and helping your accounts to grow. If you save for school costs, you can improve your skills and earn a higher income to build more wealth.
Even if you have to start small, start saving right now to make sure you can avoid interest costs on debt -- and to start getting a return on your investments.
How to start saving today
You know you should save, but how exactly can you do that -- especially if you've gotten used to living paycheck to paycheck? It's simple, especially if you're willing to start small and work your way up to saving the recommended 10% to 20% of your income.
- Make a budget and look for ways to cut expenses. If you're not saving anything right now, you have to figure out where your money is going and make some changes. A budget will help. Start by tracking spending to find out what you're doing with your cash. Then see how much money you actually want to allocate to different things. If you're currently spending $300 a month dining out, you may decide that's too much and that you're going to cut back to spending $150 and save the difference.
- Build savings goals into your budget. You should set some very specific financial goals and budget for them. For example, you may decide you want to save $5,000 for retirement this year -- which would mean saving about $193 per paycheck if you're paid biweekly. So, budget to have about this much money taken out of your checks each month and see if you can still make your total outflow and income add up. If you can't fit savings into your budget and still make the numbers work, look back at expenses you can cut -- or consider taking on a side gig to earn the extra income you need.
- Open the right accounts. You should put retirement savings into a workplace 401(k), or into an IRA if you don't have a 401(k) at work. You can sign up for your 401(k) by talking to HR, or you can open an IRA with any broker. You should also open dedicated savings accounts for other things. You may open an emergency fund account, a vacation fund account, and a down payment account, for example. Having separate savings accounts helps you track your progress and stay more motivated as you see yourself get closer to specific goals.
- Automate contributions to savings. Set up transfers each payday for a set amount to each different savings account, depending how much you've budgeted for. If the money moves over to the right accounts before you can spend it, you'll have no choice but to save it.
- Gradually increase what you're saving. As you get used to living on a little less money, try to slowly increase the amount you save until you're saving about 20% of total income for retirement and other goals. If you get a raise, you can also automatically divert the extra money to savings goals before you ever get used to spending the money on anything else. This will help you avoid lifestyle inflation while significantly increasing the amount you save over time.
It's OK if you have to start with saving just $10 a month, so long as you start saving something . You'll likely find you're more motivated to help your accounts grow once you have the accounts open and have gotten the process started.
You don't have to be one of the Americans with nothing saved
If you currently have no savings, you're definitely not alone. But it's time to make a change so you don't have to struggle more with money in the future. Act today to make a budget, allocate cash to savings, and start transferring money to new savings accounts. As you see your balance grow and you have the peace of mind of knowing you have a financial cushion, you'll be very glad you made the effort.
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