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This is a guest post by one of our partners, UNest. This post contains partner affiliate links. For more information on how we work with partners, see disclosures at the bottom of this page.
Tucking away some dollars for your future is extremely important to achieve financial stability. Especially if you are one of the 67% of Americans who has less than $1,000 saved. You may intuitively know you need to do it, but what’s the best way to scrape up the money to get going? And where should you put the money once you’ve got it? Below we will outline a plan that will help you build a better future without breaking the bank.
Follow our steps to building a savings plan even if you’re starting from $0!. Here’s how to get started.
The Basics of a Savings Plan
Just in case you’re not sure what a saving plan covers, here’s a simple definition: It’s money set aside to fund all the important stages in your life. A savings plan offers you a great way to help avoid burdens like student debt. Having a savings plan not only helps you live a more relaxed stress-free life it also helps you set a great example for your loved ones.
First Things First
Before you kick off your savings plan it makes sense to get rid of your debt first. That includes things like the money you owe on your credit cards. A good initial goal is to set aside enough for an emergency fund that covers three to six months of your living expenses prior to saving for other goals.
Feel free to put a little extra into your emergency fund — the more you stockpile, the better off you’ll be (and the less you’ll sweat when a real emergency does crop up!). But it’s important to balance out your emergency fund with your other savings for other goals.
The important thing to keep in mind is establishing a saving habit even if it’s just a small amount of money. Building good financial habits takes time and practice so don’t let the size of the deposit keep you from making it! Your future self will thank you!
Saving For Parents
As we grow older our savings goals revolve around our priorities. Often times this means saving for more than just yourself. UNest and Harris Poll conducted surveys to understand what priorities really make families tick. Parents said that if they could only save for one thing in life, saving for their children would be their most important savings goal. This is far ahead of the second choice of retirement. But kids are expensive! Getting them through each important life stage can be stressful, particularly if you leave it too late to cover the bases financially.
For most parents, their kid’s education is a critical part of their future planning. But there are plenty of other things like a first car, apartment, or wedding, that factor into a solid financial set of practices. That’s why it’s important to pick a sustainable financial plan that helps achieve your goals and has the flexibility to cover all the exciting milestones for your kids.
Of course, being a parent is not all about financial plans. But without them, a relationship can suffer. It’s important to recognize that planning and a sacrifice or two lead to a real sense of accomplishment and a better life for those around you — bedrocks for happy parents and kids! Of course the sooner you start building these habits the easier it will be to teach your kids how to save and demonstrate strong financial habits.
How to Build a Savings Plan
Building a savings plan probably won’t happen with a snap of your fingers unless you have the money already ready to plop into it. You might need to do a little bit of intentional planning first! Here are some important starting points…
- Set common goals when it comes to your finances: Finding common ground with those around you is a critical first step in turning any financial goals and hopes into a reality. This is particularly the case within families where everyone has their own take on how to spend or save. Make sure you and your partner agree on motivations and goals. You can then share in your accomplishments together.
- Save more: The pandemic has helped generate a significant trend towards more savings. Don’t let the vaccine end that! The economy is likely to be volatile for some time, and focused, pragmatic saving for your kids is never a bad idea.
- Recognize and moderate your inner conflicts: Even the most sensible financial resolution can fall victim to pesky human emotions. Impulse buys can fill a temporary hole, but will likely make you feel less than stellar in a week or two. Resist temptation. Train yourself to stay focused on the end goal of financial independence for you and your kids.
- Equip yourself: You need tools and apps that make it easy to realize your financial promised land. As an example, UNest’s Investment Account for Kids helps parents plan a bright future for their family. It also brings your extended family members into the mix by allowing them to contribute to your kid’s saving plan. It makes it easy to have your plan be a dynamic part of building a very bright future for your kids.
How Much Should You Put Into Your Savings Plan?
How much can you save per month to get started? For example, let’s say you want to save $100 each month. Will it mean that you have to cancel your daily flat white from your hip coffee place? Are there expensive purchases or vacation plans you can forego?
Be realistic about ‘have haves and ‘nice-to-haves. Spend a few minutes estimating what you spend on each category. Go to the ‘nice-to-haves list and see how much you can do without and how many dollars you can move to your savings plan. You may be pleasantly surprised at how the numbers stack up. Even if it’s a modest amount, use it to get into the habit of saving.
Set Aside Money Automatically
You will be much more likely to stay the course if you make setting your savings aside automatic. The beauty of setting money aside automatically is that you don’t miss the funds. Automating your savings can help you get to your goal more quickly as well. This way, you save your money before you have a chance to spend it. The money goes right into your savings account right after you get paid. You can do this in two easy steps:
- Direct deposit funds. Most direct deposit programs allow you to split your paycheck so a portion goes directly into your savings account.
- Schedule automatic transfers. Designate a specific amount of money to go into your account per month.
Watch Your Accounts Grow
Don’t let your accounts accumulate money without checking them every once in a while. At the very least, you’ll be depriving yourself of the pride of being such a good saver!
How much do you have after one month? Three months? Are you meeting your goals? If so, can you start funneling more money toward your savings plan?
Make sure your money is doing exactly what you want it to do — don’t lose sight of it!
Only Use the Money for Something Major
You don’t want to use your saved money for something trivial because you’ve earmarked that money for significant landmarks or requirements for your kids. Here are some examples of acceptable uses:
It’s really tempting to use your emergency money on things you think you need. A great way to figure out whether it’s truly a nonessential purchase is to delay the purchase for 72 hours. Ask yourself whether it’s a true emergency (truly an emergency!) and make a decision based on this list. If it doesn’t fit into any one of these categories, it probably isn’t an emergency.
Get a Savings Plan Going
Saving for all the things you need may seem like a monumental amount, but remember, you can do it in small increments. In fact, it might surprise you just how far $25 can propel your savings forward.
The most important thing you can do is to do something about it. You really don’t want to catch yourself in a situation where you don’t know how you’re going to pay for your home or car. If you’re a parent or expect to be one soon, you certainly want to be able to provide for your kid’s future and be a good example.
Make a dedicated effort toward your savings plan fund and your future self will thank you!