Rather than purchasing on credit, consider planning ahead and paying for the item outright. There are numerous ways to save. A good place to start is with a basic savings account.
Open a Savings Account
A savings account is a great place to put your money. You have many options to choose from.
Direct Deposit Gets You There Faster
One tried-and-true way to save money is to use Direct Deposit to send a portion of your pay directly into a savings account. This out-of-sight, out-of-mind approach helps keep you from feeling tempted to spend the money. And if the budget's tight, it's okay to start small. Even $5 each week is a perfect start. The point is to start saving—now!
But at some point, you're probably going to want to get a better return on your savings. You'll want to start thinking about certificates and IRA's, which provide advantages that a savings account doesn't.
- Generally pays higher interest or dividend rates than regular savings accounts.
- Requires you to open or "purchase" a certificate for a specific amount of time. You cannot withdraw the money during that time without paying a fee.
- Often requires a minimum deposit to open.
- Money is able to be withdrawn or moved into another certificate once it matures.
- Generally provides tax advantages.
- Does not require a minimum deposit to open.
- Excellent approach for retirement, as you cannot withdraw money until age 59½
Experts recommend establishing an emergency fund that equals a minimum of three months' salary. This fund can be used for unexpected auto repairs, medical expenses, or living expenses should there be a disruption in your regular income. (Just remember to replenish the fund if you ever borrow from it!) And remember, if you come into a large sum of money like a bonus or tax return, consider saving the majority rather than spending it.
10 Ways to Get Into the Savings Habit
- Establish goals: Need to set up an emergency fund (a minimum of three months' pay)? Pay off debt? Save for a new car? Pay cash for all holiday gifts? Retire at 50? It's easier to get somewhere when you know where you're going.
- Pay yourself first: Determine what you can put in savings, then budget to live on what's left.
- Direct Deposit: Use Direct Deposit to save systematically by assigning a portion of your net pay to your savings account. Many find this "out-of-sight, out-of-mind" method to be pretty painless.
- Separate Your Accounts: Always keep your savings a little out of reach in a separate account from your checking.
- Save Your Change: Don't spend the coins you receive as change from a purchase. Collect them over a period of time, then deposit in your savings.
- Coupons: Likewise, set aside the money you save with cents-off coupons.
- 401(k) and Thrift Savings Plans: Contribute as much as you can to your 401(k) or Thrift Savings Plan. At a minimum, save enough to get your employer's full match—it's like free money!
- Earn More Interest: Upgrade to a higher interest-earning account. Certificates generally pay higher dividend rates than regular savings accounts. Some have minimums as low as $100. Earnings are guaranteed and insured up to $250,000 against loss by the federal government at most financial institutions.
- Stocks and Bonds: Consider stocks and bonds (start with mutual funds) to earn greater, but not risk-free, returns.