You can know how to save money in all kinds of ways. You can put cash in a safe. You can just mentally classify a certain amount of money in your checking account as “savings.” But it is essential to place savings in an account created especially for this purpose. It’s the safest, it’s a good place for an emergency fund and allows you to buy something expensive. Plus, it earns a bit of interest.
You can open a traditional savings account with your bank. Or you can open a cash account, which is kind of like a combined checking and savings account. Using a cash account means that you will likely earn a lot more interest than with a regular savings account, and you can spend from that account as well.
How much should I save?
You need to save as much as you can afford. A good rule of thumb is to save at least 20% of your income. It is important to save what you can for emergencies, major life events, and retirement.
It all sounds a bit… boring, right? And, you know what, it’s kinda boring. But in personal finance, boring things allow you to do exciting things like achieve financial freedom and not have to work, as Michael Tempelmeyer, portfolio manager at Wealthsimple explains.
It is important to save money. Every time you put money aside, you move one step closer to financial freedom.
What saving a little money and keeping it on hand allows you to do in the long run – like having more fun and, you know, supporting your family – isn’t at all boring. Now that you know where to start, here’s how to some money out of your pocket into that savings account.
How to save money
Now that you know the best way to start saving money , how do you go about doing it? There are a number of tactics that will help you stop spending and start saving.
Establish a budget. It’s hard to know how much you will be able to set aside if you don’t know how much you will be able to… set aside. If you put too much money aside too soon, you risk wreaking havoc on your checking account and having to transfer it back to your account, which could put a strain on your finances.
Automate your savings. Most financial institutions allow you to link your checking account to your savings account so that a certain amount of money turns into savings without even having to press a button. Many employers allow you to split your direct deposit so that part of your check goes directly to your savings account. Even if they don’t, try to make the automatic deposit happen on payday and you won’t miss out on the money you would have otherwise spent. Consider using a cash account that normally offers a higher interest rate than the brick and mortar bank savings account.
Reduce dining and coffee trips. Could you settle for two cups of coffee, not three or eight? Or one restaurant lunch a week rather than four or five. Starbucks is expensive and so are dining out. If you’re ready to brew your own coffee and channel your inner Gordon Ramsay, you can save tons of money. When you go out, try to refrain from ordering the more expensive item on the menu or ordering lots of high-margin alcoholic drinks.
Take advantage of everything that is free. They say the best things in life are free. And you absolutely must take advantage of it. Find out about free events organized in your area. Take trips to parks and beaches in your area. Visit your museum on days when it’s free. Take advantage of free subscription services like Spotify, visit your local library rather than buying books or joining clubs that often host free events.
Become a “cord cutter”. Cord Cutter is the term for terminating your satellite TV subscription and is more popular than ever. Many people choose to save on cable TV and watch online video services like YouTube, Amazon Prime Video, or Netflix instead. It’s a good option for those who don’t watch TV. If you cut a cable TV service at $ 70 per month, you’ll save $ 840 over the year.