The personal saving rate in America in June of 2021 was 9.4%, which is a good rate of saving. However, some families are not saving adequately for retirement, and lower-income households do not have adequate emergency savings for unexpected expenditures such as car repairs or medical bills.
Saving must become a Priority
The mindset of saving needs to change. Saving is an important part of financial security and a spending plan or budget can help you save.
This can be done by setting saving goals and then developing a plan to meet the goal.
Here are four saving strategies that may help get you started in the right direction:
- Pay off high-cost debt. The best investment most borrowers can make is to pay off consumer debt with double-digit interest rates. For example, if you have a $3,000 credit card balance at 19.8 percent, and you only pay the required minimum payment of 2 percent of the balance or $15 whichever is greater, it will take 39 years to pay off the loan.
With accumulating interest, you will pay more than $10,000 in interest charges.
- Buy a home and pay off the mortgage before you retire. The largest asset of most middle-income families is their home equity. Once these families have made their last mortgage payment, they have far lower housing expenses. They also have an asset that can be borrowed against in emergencies or converted into cash through the sale of the home.
- Participate in a work-related retirement program. If you participate in a work-related retirement program such as a 401k plan, with a dollar-for-dollar match, you will likely receive an annual yield of greater than 100 percent of your investment. You save $100 and get $200 or more with the employer match.
- Outside of work, save monthly through an automatic transfer from checking to savings. These savings will provide funds for emergencies, home purchases, school tuition, or even retirement. What you don’t see, you will probably not miss.
Once you realize that you need to save, develop a saving goal. Then develop a plan to meet the goal.
If you do not have an emergency fund, that should be your first goal. Build up a $1000 emergency fund.
By using the strategies above, you could, in no time, be on your way to meeting your goal and improving your financial situation.