5 avenues for growing the money in your savings account
Everyone wants to learn how to save money, but it can be hard to know the best ways of doing it. It’s easy to think that putting a little money into a savings account every month is all you need. While no one would knock you there, there are plenty of other things you can do to really boost your savings in the long run.
Whether that’s starting a high-yield savings account or paying off debt, you don’t have to be an investing expert to save a little extra cash every month. Keep reading for our five best tips on how to save money.
1. Set good savings goals
A good savings plan starts with setting the right savings goals. Lay out all your current and future financial goals — whether that’s paying for college, buying a house or putting money aside for emergencies — and create a few short-term and long-term yardsticks to help you stay on track.
But don’t go in blind. It’s important to measure your savings goals against your budget. Don’t just commit yourself to setting aside $1,000 every month if your income won’t support that.
Be realistic. Take a good look at your expenses and set targets you feel comfortable hitting each and every month. Putting 20% of your income per month into a savings account is generally a good rule of thumb.
2. Pay off debt
Debt is a big-time savings killer, so paying off debt as soon as you can is one of the best ways to fatten your savings account and make some serious headway toward your savings goals. Focus on the high-interest debt first — things like credit cards and personal loans — since that’ll help you get rid of the debt that’s really sinking your savings. Then set your sights on low-interest debt, like your student loans and mortgages.
When you pay off debt, you’ll have more money in your pocket every month, which you can put away in your savings account or use to make other investments.
3. Create a long-term savings account
A long-term savings account is exactly what it sounds like — a place you put the money you don’t expect to spend any time soon to let it grow over time.
There are many different types of long-term savings accounts out there, but they all work by using something called compounding interest. Basically, the longer your money sits in your account, the more interest it collects and the more money you’ll have when you actually do need to withdraw it and use it.
The different types of long-term savings accounts include:
- Certificates of deposit.
- High-yield savings accounts.
- Individual retirement accounts.
- Education savings account.
4. Save up and buy a home
Spending money to save money? You bet! Homeownership is one of the best investments you can make, and it can really put you on the path to long-term savings if done right. Houses tend to go up in value over time, meaning buying a home today will give you a lot more money when you go to sell in a few years (or decades) from now.
You can also use the stake you own in your home — called equity — to open new lines of credit for other investments, like starting a business. Use the extra cash you make from those investments to put even more money into your savings account.
When saving for a home, it’s important to save up enough to pay at least 20% of the house’s value as a down payment — that will help you avoid costly mortgage insurance payments, which can really add up over time.
5. Cut down your expenses
Saving isn’t just about setting money aside or making smart investments — it also means tightening up your budget and cutting out any unneeded expenses. Set limits on your nonessential purchases and do your best to stick to them. That includes things like entertainment, going out to eat (or for drinks) and all those random Amazon splurges.
But budgeting even works for essential purchases because there are always ways to save money on things like groceries and rent. One thing you might want to try is paying your car insurance in full at the beginning of the year, which can really help you save money in the long run.
Partner with Ameritas
Learning how to save money starts with having the right partner on your side. Ameritas is in the business of fulfilling life. Bringing you valuable information to help you plan well and enjoy life is part of what we do. To learn more about Ameritas, visit ameritas.com/about.
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