What’s Your Savings Approach?

What’s Your Savings Approach?

How do you approach your savings?

When you were young, you may have stashed your precious pennies in a piggy bank, saving them up until you could dump the entirety of your coin collection onto the floor, count it up, and daydream about what that total could afford you.

As you got older, your savings approach probably evolved from hoarding found pennies to collecting dollars from allowances and odd jobs, all in the hopes of saving up enough to buy the latest hit CD release or ticket to the movies.

But what happened when you got to college?  If, like many, you lived by the “I’m a broke college student mantra”, perhaps you stopped counting those dollars and cents altogether and resigned yourself to the demands on your money in the present being far too great to plan for future savings goals.

Unfortunately, that common collegiate “broke” mentality has a tendency to linger on even after the first paychecks of post-grad, work life start trickling in.  After all, life is expensive when you have to pay for it on your own.  

And so, life goes on while the brakes on savings hold, often locked in that down position long past due - leaving many smart, young professionals financially vulnerable and unprepared.

The early childhood experience of piggy bank savings teaches an important lesson that too often gets forgotten during the flux of new financial demands in early adulthood - savings is a necessary tool for reaching future goals.  Just as saving up five pennies once paid for a piece of gum from the candy shop, small contributions from each paycheck can pay off in years of retirement. 

So if procrastination has been your primary approach to savings in the past, consider what those savings really mean…

A Safety Buffer.  Without accessible, liquid savings you leave yourself vulnerable to high interest credit card debt should any unexpected emergencies or necessary unforeseen expenses arise.  Savings serve as a kind of financial safety buffer.

Fulfilling Short-Term Goals.  Whether it’s a down payment on a home, a wedding, a vacation, or a new computer - savings are the ultimate tool for funding goals.  Defaulting to credit cards and spending your entire life in a cycle of paying back your past is setting yourself up for the constant anxiety and financial burden of high interest debt.

Retirement and Long-Term Freedom.  If you have any hope of retiring some day without living in a cloud of financial anxiety, you’ll need to put some long-term savings strategies in place.

To make sure you achieve all three of these savings realities, you may need to reassess your current approach.  Make savings a priority every month rather than a backburner, “I’ll get to it someday” goal.

Use our PASS acronym to help you remember your savings strategy and reprioritize your savings plan!

  

Pay Yourself First.  If you figure you’ll save whatever’s left over at the end of each month, you’ll probably find that you run out of money before making a savings contribution.  Start making savings as non-negotiable as your housing payments by making a deposit into your savings and/or retirement accounts on the first of every month.

Automate.  If setting aside money on your own proves to be too difficult, schedule an automatic transfer from each paycheck into a savings account.  The more automatic you can make your savings process, the more likely you are to establish the savings habit without self-sabotaging by preemptively spending your savings contributions.

Segregate.  Have separate savings and/or investment accounts for each savings goal to more easily track your progress.  For investment accounts, it is important that you tailor the investment approach to the purpose of the funds in each account, so having unique accounts makes this process much easier and more effective. 

Set Specific Goals.  The more clarity you can bring to why you need to save - whether it’s to buy a home or to pay for your children’s college education - the more motivated you’ll be to achieve your savings goals.