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With inflation soaring and everyday expenses becoming increasingly unaffordable, saving is more of a challenge than ever for many Americans.
Research from Statista has found that the average personal savings rate (the portion of a person’s disposable income put into savings) for 2022 stands at 5.1%. Alarmingly, this figure is down from 10.5% in July 2021.
However, while times are undeniably tough, there are things you can do to help you save as much as possible and get the most competitive return on the funds you do have.
Here are our top 12 tips for boosting savings during these challenging times.
Devise a Savings Plan
When planning for your financial future, having a clear goal can help you stay motivated.
Rather than thinking that you would simply like to save as much as possible, consider what you would ultimately like to achieve. You may, for instance, want to put a set amount into your children’s college funds or be mortgage-free by a certain age.
With this information, you can determine how much you need to put aside each month to achieve these goals and draw up a savings strategy.
Switch to a High-Yield Savings Account
Whatever the size of your savings pot, it makes sense to get the maximum possible benefits from your funds. However, worryingly, research from the FDIC has found that the average savings account in the United States pays a derisory rate of just 0.21%.
If you’d like to achieve the most competitive return, the first step is to check the interest rate you are receiving on your current savings account. If your money languishes in an account with a low rate, it’s sensible to investigate whether you could get a better deal from another bank.
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3. Analyze Your Bank Statements
One of the first steps you should take when building a saving pot is to go through your spending with a fine-tooth comb.
This way, you can get an accurate view of how much money is leaving your account every week and see where it is going. In many cases, you may be able to identify areas in which you didn’t realize you were overspending. For instance, you may not be aware of the amount you’re paying for your weekend takeout or after-work drinks.
Likewise, you could discover that you are paying for a gym membership that you never use or streaming services you rarely watch. If so, consider canceling these and instead pay the equivalent amount into a savings account.
4. Consider an Online Savings Account
While you might be tempted to stick with a traditional high-street name when looking for a new savings product, you may find that you can get a more competitive deal with the new generation of challenger or app-based banks.
As these companies do not have the expenses associated with running branches, such as paying rent or energy bills, they can often pass these savings on to customers.
However, while not having brick-and-mortar premises can result in more attractive rates, you may find this isn’t ideal if you prefer to manage your finances in person by visiting a branch.
5. Have an Emergency Fund
Life is full of unexpected complications, so it’s wise to have a financial safety cushion. Should a disaster such as a job loss strike, you’ll be able to cover your immediate expenses.
However, the current financial climate could mean that building an emergency fund is more important than ever. According to a recent survey, 36% of US adults have tapped into their savings to cover their living expenses since the beginning of the year.
Personal finance gurus often advise you to have at least three months of your monthly income in an emergency fund. Even if this isn’t achievable, it is worth setting aside as much as you can afford.
6. Save Automatically
By setting up an automatic transfer from your checking account into your savings account each month, you won’t be tempted to spend any spare cash on luxuries you don’t need. Many people make these transfers on the same day their paycheck arrives in their account, or shortly after. The theory is that you can save money without even realizing it.
7. Make the Most Out of Technology
Many app-based savings accounts include tools to help you better organize your finances. Some, for instance, let you create separate areas within your accounts to save toward different goals. For example, you may want one area for saving for your child’s education and another for buying a new car.
Likewise, some accounts include budgeting tools that help you identify trends in your spending and highlight areas in which you could save.
Other tools round up any spare change left over from your everyday transactions and automatically transfer this money into your savings.
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8. Agree on a Spending Limit for Gifts
While choosing the right savings account is key to increasing your savings, building a nest egg is also about having the right mindset.
As the holiday season approaches, one of the most effective ways to save is by avoiding overspending on gifts.
According to research from Statista, the average American expects to spend approximately $930 on Christmas gifts in 2022. In all likelihood, a significant portion of these gifts will be unsuitable, unwanted, or even returned by recipients.
Consider talking to your loved ones about the possibility of not buying presents this holiday season, setting a spending limit, or running a secret Santa. You can then calculate the amount that you would have spent on gifts and instead place this money into a savings account.
While you may feel reluctant to suggest cutting back on the festivities, you could find that your friends and family are also looking for the chance to save a little extra money.
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9. Get the Best Deals on Your Bills
When attempting to build a nest egg, you will probably make slow progress if you routinely overspend on household bills.
To identify potential savings, it’s a good idea to run an annual financial health check in which you review the amount you’re spending on your insurance, phone bills, and other regular monthly expenses. You should then check if you could find a better deal by switching to another provider.
In many cases, remaining loyal to the same provider rarely pays off, as companies often reserve their most attractive deals for new customers.
10. Reduce Interest on Your Debts
According to research from CNBC, the average American is in debt by a staggering $90,460. While debts such as mortgages are not necessarily a bad thing, owing money on credit cards or personal loans is often less than ideal when you’re attempting to save.
However, the good news is that you can get yourself back on track more quickly by reducing the amount of interest you pay on the money you owe.
Start by checking the rate on your current credit card. You could be paying less with another deal, so you may want to shift your debt with a balance transfer. This is where a credit card provider will let you move your existing debt from your current lender to a product with a lower interest rate.
By paying less interest, you can ultimately clear your debt sooner and set up a savings nest egg.
11. Ensure Your Savings Are Protected
If you’re saving for the future, you will naturally want the maximum possible protection for your funds.
When choosing a new savings account, you should check that the institution you’re considering is covered by the FDIC scheme. Under this government initiative, your savings are protected by up to $250,000 if the institution fails.
If you’re saving with a credit union, the National Credit Union Administration can also insure your funds up to $250,000 per person.
12. Budget for (Occasional) Treats
Despite the obvious lifestyle and psychological benefits of being financially fit, it's important to strike a balance when saving money.
As such, you should make room for occasional treats in your budget. Something as simple as a trip to your favorite restaurant can provide a psychological boost after you’ve worked hard to save money and cut costs.
Remember, the aim is for saving to become a good habit that you build into your everyday life, rather than a painful chore.
Current economic conditions are, of course, making it tough for many of us to put money aside. While these conditions may continue in the short and medium term, following the tips above could help you to benefit as much as possible from any money you can save each month.
Although saving money may be difficult at first, your efforts will soon feel worthwhile as your balance starts to climb and you begin to reach your goal.