Saving for Your Goals
When you created your budget, you planned to set aside a certain amount to save toward your goals each month. Think of your money as a pipeline: as money comes in, it’s routed to savings or expenses as outlined in your budget.
If you find more money is going toward expenses than you’d like, you can take control of the situation by trying out these savings strategies:
Take advantage of free money. If your employer offers a 401(k), 457, 403(b) or other retirement savings plan, sign up to contribute. Not only can you benefit from tax-deferred growth, but if your employer offers a match, you’ll also save even more without diverting any additional money from your other goals.* Win-win!
Take an out-of-sight, out-of-mind approach. You won’t miss (or spend!) money you don’t see, so pay yourself first by using Direct Deposit and splitting your paycheck between your checking and savings accounts. If your payroll doesn't allow for direct deposit to be split, you can set up automatic transfers from one account to another.
Commit to your goal. Opening a separate savings account for each goal is a great way to help track your progress. Not only that, but club accounts like Navy Federal’s SaveFirst Account can help you commit to a goal by pledging to a term of a few months or years. Club accounts are a perfect way to save for vacations, big-ticket items or large holiday purchases.
Look for higher-yield accounts. You may be able to earn more in interest by depositing your money in other types of savings vehicles. Money market savings accounts and certificates can potentially offer you higher interest rates than a traditional savings account. However, you may have to maintain a larger account balance or wait for a maturity date to benefit from these higher rates.
Here are some other simple and creative methods to help you get in the habit of saving and increase your account balance.
52-Week Money Challenge
Intimidated by the thought of moving money in the triple digits from your checking to your savings? Easing yourself into a savings habit might be the way to go. Try challenging yourself to put away just $1 in savings this week. That’s right—just one buck. Then, next week, put away $2. Keep bumping up your savings contributions by another dollar each week, and by the time a year rolls by, you’ll have a cool $1,378 in savings. Not bad, huh?
Saving Every $5 Bill
Even if you don’t save 4 bills each week, you can still save a surprising amount with a more conservative saving plan of 3 $5 bills per week:
Remember club accounts? Because they function like a cross between traditional savings accounts and certificates, they can be a useful tool. You could modify the “saving every $5 bill” plan so the money goes into a club account instead of a jar, thereby earning interest. Let’s use a simplified model of depositing $15 each week for three years. Above is a representation of how you'd benefit from the dividends of a club account with a 0.50% dividend rate and 0.50% APY that compounds daily and is credited monthly. The weeks represented are from every half-year and year point.
Savings That Grow With Your Child
Many large expenses can crop up as your child gets older: buying a car, paying for college, funding a wedding. All amazing milestones, but pricey ones as well. So it’s smart to start saving while they’re young. And, there’s an easy way to save almost $8,000 by the time they reach adulthood. Just save according to their age.
Here’s how it works. You save $1 per week when your child is 1 year old. Then, save $2 per week the next year. If you continue to up your savings contributions as your child gets older, you’ll have saved a large sum without sacrificing more than $20 a week.
Put “Found Money” to Use
Sometimes you literally find money in your pocket or under a couch cushion. Other times, you might “find money” when you get a bonus from work, refinance to a lower-interest loan or decide you might not really need over 300 cable channels.
To make the most of this “found money,” you can put it toward savings. Since this method relies on money you didn’t plan on having anyway, you’ll be able to grow your savings with almost no effort!
Continue “Paying” for a Paid-Off Debt
Say you’ve been making regular monthly payments toward a debt such as a car or student loan. Then the day arrives when your debt is finally paid in full. By this time, you’ve probably grown accustomed to making that payment each month. It’s already worked into your budget, so why not continue making “payments” that go toward your savings instead?
For example, suppose you’ve paid off a car loan with a $350 monthly payment. Stash that money away for a year, and you’ll have more than $4,200. If nothing else, you could consider these deposits to be a down payment for your next car.
*Taxes will be due at ordinary income tax rates upon withdrawal from a traditional employer-sponsored retirement plan. Premature withdrawals (generally, those made before age 59½) may be subject to a 10 percent tax penalty, too (does not apply to 457 plans). Premature withdrawals from a Roth account may be subject to ordinary income tax and a 10 percent tax penalty.
When you save using certificates, a strategy called “laddering” can help you manage the potential risks and rewards. With laddering, you invest in a number of certificates with varying maturities (terms), rather than purchasing one certificate for a longer term.
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