A 2017 GOBankingRates survey broke some alarming news: over half of Americans have less than $1000 in a savings account, and almost half of the people who fall in this category don’t have anything in a savings account at all. With almost 7 out of every 10 Americans having somewhere between absolutely nothing and just $1,000 in savings, there’s reason to be concerned about the ability of many Americans to pay for emergencies.
If you’re one of these Americans who doesn’t have a savings account, it’s time to start one. I’m sure you’re fully aware that emergencies come up, and emergencies often come with a hefty price tag. I totally sympathize with the assumed reaction here, which is that you just don’t have extra money to save. However, if you don’t think you have money to stick in savings now, you certainly won’t have the (much larger sum of) money to cover an unexpected expense.
Getting Started with Savings
Starting to save doesn’t require hundreds of dollars, especially if committing to save is going to require some serious budgeting shifting for your family. Even starting with just $20 and adding $5 a week is a great way to start forming healthy saving habits.
Looking for small things to cut out of your budget and redirect those funds to savings is a favor to your future self. I promise that while cancelling Netflix or choosing to eat meatless meals 2 times a week to cut back on the grocery budget might feel like a huge sacrifice in the moment, the sacrifice will seem much smaller when you’re better prepared financially for an emergency.
Many people who save have one checking account and one savings account. The checking account is used for daily expenses, and the savings account is where they stick money back for anything that might come up – an emergency, a vacation, a medical bill, or a down payment on a new house to name a few uses.
Savings accounts can be opened at your local bank or credit union, or through an online bank. It’s worth looking into an online bank for savings as they often have much lower overhead and are able to offer significantly higher interest rates than traditional financial institutions.
If you don’t think you have much money to save, there are lots of savings challenges to help you find a little money to save here and there. Challenges range from saving $1 each week to match what number of the year that week is (first week of the year = save $1, last week of the year = save $52) to saving 1 cent for what day of the year it is (January 1st = save 1 cent, December 31st = save $3.65), among others. You can do this with actual currency, or set up auto transfers from your checking account to savings.
Multiple Savings Accounts
While saving money is always a great practice, saving all your money in one account can be problematic. Let’s say you spend your entire savings account taking a beach vacation. You get home and find that your car won’t start in the airport parking lot. You have to pay to get it towed, and you later get a $500 bill from the mechanic for a new starter. You just spent all your savings on margaritas on the beach, how are you going to pay for this?
Having multiple savings accounts, each designated for something different, can help you avoid situations like this. Different savings accounts might include an emergency account, a travel account, a Christmas account, a vehicle account, or a home improvement account.
When you have multiple savings accounts with specific designations, you won’t spend everything you’ve saved on one expense. Of course there will be times than an emergency or an opportunity costs more than what the most closely designated account can cover, so it’s nice to have other funds to pull from in these instances.
Splitting what you can save into multiple accounts may mean it takes longer to reach your savings goals. However, it’s worth it to be able to treat yourself or cover an expense without it affecting your other savings goals.