Saving comes easy for some people and not so easy for others. Some people can save money on the short term better than for an extended period of time. Which type are you? When it comes to saving money, making sacrifices and changes to how you spend, is something we all must do. What you give up depends on what you and your family value most.
To accumulate an emergency fund equal to nine months (12 months is ideal) of your take-home pay or living expenses; start with saving your deductible, double that amount; add money that after 6 months is at least one month mortgage or rent payment. When you have saved your first $1000, move to a certificate of deposit (CD) and keep working on your next $1500.
There are many ways to save. But the most important thing to remember about a savings plan is to keep it safe, simple, and steady. If you make saving automatic, it will be easier to stick with your program. A plan for saving and investing is an important part of a household spending plan. Begin today to build your savings for a financially secure future.
Is your money safe?
Money needed to pay monthly expenses, to meet emergencies and to save for short-term goals must be convenient, readily available and safe. It should also be in an account that is safe. Most savers keep emergency money in a savings account or a money market deposit account. Both of these accounts are federally insured and available through local financial institutions. Checking accounts at banks and credit unions are also insured accounts.
Do not confuse money market deposit (savings) accounts with money market mutual funds. Money market mutual funds, although relatively safe, are not federally insured deposits. Both types of accounts are easy to open and require a minimum deposit.
How much to save?
It depends on amount needed for goals:
$ How much money do you need?
$ How much time do you have to save the money?
$ What interest rate can earn you on your savings?
For example, let’s say your goal is to take a dream vacation in three years. Determine how much per person and grow total amount. You think you’ll need $5,000, and you plan to save at your bank.
$5,000/36 months = $138.88 each month.
You would need to save approximately $140 each month for 3 years to reach your goal.
To calculate your own savings plan, divide the amount you need to spend by the time you have to spend it.