Savings
Section I / Section II

Knowledge can motivate you to save. For example, compound interest is exponential. Take advantage of it. You get interest on your principal:

Another Example:

Strategies

• When you get money from "where-ever," put some back in savings first.
  
  
• Set the bar for savings goal in $ figures. Write it down.
  
  
• Have a spare change jar into which you toss coins (pennies, nickels, dimes). Quarters are for laundry.
  
  
• Pay yourself first by putting a regular amount in savings when you sit down to pay bills. Don't rely on "saving what's left over."
  
  
• Set up an Automatic Payroll Deduction: When your paycheck is deposited in the bank or credit union, have a regular amount withdrawn into a savings account(s).

• Reduce impulse buying and save by resisting hype and advertising and "Point of Sale - Impulse Purchase Displays." Shop from a list -- only buy what you came for except for something you need is on sale. Compare prices and methods as a way to save money on decisions. For example, E-commerce and catalogs are not always the cheapest since you add in shipping and handling.
  
  
• Plan ahead a little to save money by avoiding: late fees, finance charges, over-the-limit fees, access fees at ATMs, bounced-check fees, convenience fees/prices.
  
  
• Be Positive - save FOR something, rather than denying yourself. Think of it as "buying the future." Have an envelope with a picture of what you're saving for.
  
  
• Have a savings account at the same time you are paying debts.
  
  
• Be reasonable with current expenses, hobbies, collections, gifts, and worthwhile experiences. Every time you resist eating out, remind yourself that you can be entertained in less expensive ways.
  
  
• Compete with someone for "most money saved" over some time period (week, month, semester).
  
  
• Over-withhold from your paycheck then put the tax refund in savings. However, beware that your money is not earning interest while held by the government.
  
  
• When (if) you get a raise, save the increase, or at least half of what is added to your paycheck.
  
  
• Set a saving goal in $'s for short-term, intermediate, and long-term goals.

Frequently, the goal of having savings equal to 3 to 6 months of expenses is recommended before you start investing. This gives you time to find another job if you lost one, recover from an accident, get well, or move. Of course, if you someone or somewhere to go, never have an accident, or never lose a source of income, you do not need that much savings!

Not motivated to start saving early? Consider the comparison of two recent graduates. One graduate saves $2000 per year for six years in an Individual Retirement Account, and then stops. With the magic of compound interest and investing pre-tax dollars, at age 65 he will have accumulated $1,235,339. Another graduate does not save for the first six years and then saves $2000 per year. He will have to continue saving $2000 every year to reach about the same amount as the first graduate at age 65 - $1,235,557. This illustrates the urgency to start saving, so that time is on your side.

Savings Section I / Section II Advance to Investment Return to Insurance