The saving rate in America this year has been between 5.8% and 5.1% thru June of 2022, however, it’s not where it needs to be. Start today and kick-start your savings. Saving for retirement and having adequate emergency savings for unexpected expenditures such as car repairs or medical expenses is a big part of being financially secure.
Make Saving a Priority
The mindset of saving must change, and we must realize and make it a priority. Make saving a priority by setting saving goals and developing a plan to meet them. Then, continually assess progress and take action to meet goals when needed. You need a spending plan.
Below are five tips to kick-start your saving:
1. Pay off high-interest debt. The best investment most borrowers can make, is to pay off high-interest consumer debt. For example, if you have a $3,000 credit card balance at 19 percent, and you only pay the minimum payment of 1 to 3 percent of the balance or $20 – $35, whichever is greater, it will take more than 30 years to pay off the loan. With accumulating interest, you will pay more than the item cost in interest charges.
2. Buy a home and pay off the mortgage before you retire. The largest asset of most middle-income families is their home equity. Once you make the last mortgage payment, you will have far lower housing expenses. Further, you have an asset that appreciates and can be borrowed against in emergencies or converted into cash through the sale of the home.
3. Participate in a work-related retirement saving program. Many employees turn down free money from their employer by not signing up for a work-related retirement program such as a 401k plan. If you do decide to participate, with a dollar-for-dollar match that some companies provide, you could likely receive an annual yield of greater than 50 percent of their investment or more.
4. Outside of work, save monthly through an automatic transfer from checking to savings. A great way to start saving because what you don’t see, you probably won’t miss. These savings will provide funds for emergencies, home purchases, school tuition, or retirement. Most banking institutions will, on request, automatically transfer funds monthly from your checking account to a savings account, U.S. Saving Bond, or stock mutual fund.
5. Earn up to 9.62 percent or more with U.S. Series I Savings Bonds. The composite or earning rate for I bonds issued from May 2022 through October 2022 is 9.62 percent. This rate applies for the first six months you own the bond. I bond earns interest monthly from the first day of the month on the issue date. The interest accrues until the bond reaches 30 years or you cash the bond, whichever comes first. The interest is compounded semiannually. Every six months from the bond’s issue date, interest the bond earned in the six previous months is added to the bond’s principal value, creating a new principal value. Interest is then earned on the new principal. You can cash the bond after 12 months. However, if you cash the bond before it is five years old, you lose the last three months of interest.
Final Thoughts on Saving
Once you realize the need to save, develop a savings goal and kick start your savings.
If you do not have an emergency fund, make this your first savings goal, and then commit to $300, and then $500 on your way to a $1000 emergency fund.
Devise a plan, strategy, or vehicle to meet the goal. Create a spending plan. Try one or two of the tips above, and in time, you will be on your way to meeting your goal and improving your financial situation.
The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.