Easy Steps for Saving | SunTrust Resource Center

How to Start Saving

Easy Steps for Saving

We all know we should save. "The reason is simple: to protect your lifestyle, your security and your future well-being," says Vince Shorb, chief marketing officer of the National Financial Educators Council.

Still, many Americans struggle to put away money for education, retirement or even emergencies. Be sure you're saving enough by following these five easy steps:

1. Use direct deposit

Direct deposit and automatic transfers will deposit a fixed portion of each paycheck into a savings or investment account while the rest goes into your checking account.

If you don't have an emergency fund, use direct deposit to build one. The rule of thumb: Have at least six months of living expenses in cash. But you could need more. Be honest with yourself, says Shorb. "Consider your skill set, your connections and your particular industry," he says. "If you lost your job, how long would it take before you could find employment?"

Your financial security blanket should cover the amount of time you think you could be out of work. Also be sure to tuck away some money for unforeseen expenses like auto repairs and medical expenses.

2. Take advantage of automatic deferrals

Once you have a sufficient emergency fund, you're free to save for both short- and long-term goals. If you have a workplace retirement plan, automatically divert a percentage of each paycheck to that account. You'll never see the money, so you won't miss it or be tempted to spend it.

The same goes for education savings: Automatic deferrals into a dedicated account free you from having to remember to save and ensure you don't spend the money elsewhere.

3. Pay down debt

Sending extra money to your credit card companies can crimp your ability to save short term, but it will free up funds for saving down the road.

Say you have a $5,000 balance on a credit card charging 16 percent interest. Paying $200 more than the monthly minimum will reduce your total interest over the life of the debt by more than $1,900 -- money you can put toward your future.

4. Stash bonuses

Windfalls or bonuses provide another opportunity to boost your savings. Feel free to use some of the money on a small splurge -- but saving at least some of it will get you that much closer to reaching your goals.

5. Save your raise

Every time you get a raise, devote a portion of it to savings. Let's assume you make $60,000 a year, receive a 2 percent annual raise and contribute 6 percent to your employer's retirement plan. Increase your retirement contribution by one percent a year, and within 10 years you'll be saving $10,755 annually -- almost triple your current contribution. And because you'll never give yourself a chance to spend the money, you'll never miss it.

 

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

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