According to Statista, the average American saved 5.6% of their disposable income in February 2017. Whether you fall below or above this average, you may have a desire to increase the amount you save.
From payroll deductions to utilizing mobile apps, here are some tips to make your savings grow:
Make saving automatic
One efficient way to make your savings grow is to create an automatic savings plan. These plans allow you to automatically deposit a fixed amount of money into your savings account based on a recurring schedule1. The amount and frequency of the deposits are up to you.
Some options for an automatic savings plan include:
Voluntary payroll deduction - With voluntary payroll deduction, some employers allow employees to automatically deposit money from their paycheck into a savings account2. This agreement is set up through the employer and gives an employee the flexibility to choose how much they want to be deducted and the option to change that amount in the future2.
Recurring transfer - Recurring transfers are preauthorized withdrawals that transfer funds between bank accounts and other financial institutions3. For example, if your paycheck is directly deposited into your checking account every two weeks, you could set a recurring transfer from your checking account to your savings account on the days you get paid.
Trim costs from your budget
In addition to making smarter money choices, trimming costs from your monthly budget could directly benefit your saving efforts. There are two ways to potentially accomplish this goal. One is to designate a target dollar amount, search your budget for nonessential items that equal that amount and make the necessary cuts. Another way is to simply examine your budget, cut costs that don’t seem necessary and save the surplus money. Either way, you’re directing less money toward expenses and more money toward savings.
Here are some other suggestions to free up more money to save:
- Cancel or downgrade monthly subscriptions such as cable, internet and magazines
- Comparison shop for items such as groceries, clothing and prescriptions
- Cut down on utility bills such as gas, electricity and water
As modern technology continues to transform the finance industry4, it can be used to help boost your savings as well. In fact, if you have a smartphone or mobile device, you might be able to monitor and deposit money into your savings account from the palm of your hand.
Some apps to consider downloading include:
A banking app - Most major banks offer a mobile app for their customers5. If you download the app for the bank where you keep your money, you should be able to monitor your balance and transfer money between your checking and savings accounts. Having quick access to these capabilities might also influence you to build a routine of making extra deposits on top of your scheduled monthly deposit.
A savings app - Savings apps provide a variety of convenient functions to help you meet your goals. One option is to connect an app to your debit card, credit card or checking account and have it round up your purchase amounts to the nearest dollar. The app will then save the incremental amount into a savings account of your choice6. For example, if you make a purchase for $7.50, the app will recognize the transaction, charge your account for $0.50 and save it in your designated account6. However, if you prefer to save a different way, other apps can analyze your income and spending through your checking account to establish a savings plan for you7.
Don’t touch it
One of the most important tips to make your savings grow is to avoid making a withdrawal. If you withdraw funds from your savings, it could halt your momentum or become a bad habit.
Here are a few ways to safeguard your savings account:
- Keep your savings at a different bank than your checking account - If keeping both accounts at the same bank is too tempting, open your savings account at a different bank. Having to go out of your way could make you think twice and prevent you from making a withdrawal.
- Set it and forget it - If you automate the deposits into your savings, don’t touch the account after you set the recurring date and deposit amount. Only monitor the balance.
- Save up an emergency fund - Emergency funds are smaller savings accounts used for sudden and unexpected costs. For example, if you need a new water heater, you can rely on your emergency fund instead of withdrawing from your savings account.
Do what works for you
There are a variety of ways to make your savings grow and it’s important to do what works for you. Once you find your best saving strategy, your confidence and comfort level can rise along with your account balance.