- Automatically add to your savings account.
- Whenever you splurge, you should also save.
- Introduce saving to your child’s everyday routine.
While the notion of saving a little bit every day has been around since before piggy banks existed, it’s a good one; especially when updated for modern times. Think about what five years of saving a dollar each day would give you. Couldn’t you do something awesome with $1,826?
Stashing one dollar away into a piggy bank that earns zero interest isn’t taking full advantage of your newfound discipline, however. Instead, think about opening a savings account; or, even, an investment account. You can automatically deduct a dollar every day from your checking account using the tools the account provider has. And if you choose to invest your savings, your total might end up above $1,826 after five years, if markets perform well over the time period during which you save. In the savings account, you’ll also make at least some interest on your money, even though those rates are generally low.
You might use this same process when saving for retirement: automatically deducting a portion of your paycheck. Many people start with just 4% of that check, then increase that rate by one percentage point a year until they get to 10% or more. Starting small can help you slowly get comfortable with saving larger sums.
Round off purchases on your favorite items
Most of us have made exciting purchases, only to feel regret later on. It’s called “buyer’s remorse”. To reduce your chances of feeling guilty, consider putting money into savings every time you splurge. Through many debit or credit cards, you can now round up certain purchases to the nearest dollar. These services will then let you transfer the excess into a savings account. For example: if you spend $71.08, the tool would round your cost to $72 and place 92 cents into your savings account.
Once you’re comfortable with this tactic, you can:
- Set up the tool so it rounds up when you’re buying groceries or eating at a restaurant
- Round up items to save for a specific purpose, using related apps
- Funnel the money into an investment account of your choosing after you’ve rounded up
This won’t replace your larger saving efforts, but it will bolster them in a painless way. You can augment your savings goals with this trick, raising money for a home purchase or your child’s college tuition, etc., while it grows at market rate.
Start building your child’s habits
This summer, a child allowance strategy went viral when Humans of New York interviewed a family who gives their children one dollar a week. As to what to do with the cash, the child has to choose between four options: spend, save, donate or invest. If a child invests the dollar, he or she receives two extra pennies every month. One of the children interviewed for the piece says he has “way over $10 in (his) invest section.”
This strategy teaches kids about choices for saving; it also incentivizes the long-term saving strategy of investing. Having these options at a young age allows children to understand what’s available to them, and educates them to the downside of spending everything they have. This and other child financial literacy strategies have a way of encouraging smart spending and saving habits for life.
What you can do next
Easy-to-implement strategies can become regular habits with the right plan and tools at your disposal. Not only can they help you become more comfortable with saving, they can also benefit your children.