January 31, 2023
Trying to save for your future is like trying to lose or maintain a healthy weight. You always start with good intentions. But it’s hard to have the discipline to keep on a diet, or follow good savings habits, when fattening foods call out to you—or when that fancy car, home, or high-end restaurant that you may not really be able to afford offers such a tempting alternative for your money over a savings account.
Despite all that, most of us never give up striving for health and fitness. It’s never too late to start being a smart saver. So here are some approaches that could help make a better saver out of even the chronically savings challenged!
The first step in figuring out how much you could be saving usually is to understand how much, and on what, you’re spending your money. You can start by reviewing account statements from your checking account and credit cards and categorizing expenses into key groups such as rent, utilities, debt payments, food, entertainment, clothes, subscription services, etc. It is often useful to look at variable expenses like clothing and food to find out where there may be room to cut.
If you’re willing to log your expenses and put in the effort to track them in real time, there are apps like Mint and You Need a Budget that can help.1
Now that you feel a bit more in control of your life by understanding your expenses, you could make a savings plan. Those with a savings plan are twice as likely to save successfully.2
There are lots of ways to create a savings plan. But for the savings challenged, you might need some help. The Consumer Federation of America is offering assistance by asking you to take the America Saves Pledge. They’ll help you set a goal, create a plan, and keep you motivated with advice, tips, and reminders.3
A great way to save is not to make regular savings decisions at all. The secret here is to use the plan in step two to figure out what portion of your regular paycheck you need to put into a checking account to pay bills and other expenses, and what percentage you can comfortably put aside for savings.
Then, you may be able to have your employer divide your paycheck into separate percentages to go into your checking and savings accounts. Your employer may have a form to do this. If not, it can’t hurt to ask.4 Using automated transfers to generate regularly recurring savings deposits reverses the burden of action—you have to act only if you prefer to save for a given period.
If you're keeping all your money in a checking account and earning no interest or a paltry percent, you could be missing out on an opportunity to earn more interest and save more. In fact, the average checking account delivers rates significantly lower than what's typically offered by high yield savings accounts (HYSAs). More specifically, interest bearing checking account rates have remained under 0.1 percent for more than five years.5 HYSA rates, on the other hand, often exceed rates of 1 percent. Both numbers may look small, but over time, even a HYSA rate of 0.6 percent will yield more interest than a checking account rate of 0.04 percent.
If you’re willing to tie up your funds for a longer period, say a year or two, you could also earn more in a Certificate of Deposit (CD) – another savings option that tends to have higher returns than a traditional checking account.
Start with a small goal of reducing your credit card debt by $1,000. A $1,000 debt reduction could save you $150-200 a year in interest, or more if that amount caused you to pay penalty rates.6
Reducing the interest you pay on a credit card or other debt card is one of best ways to save money. You can create a plan to pay off your debt. Try calling your credit card company to see if they’ll give you a cheaper interest rate to keep your business. Or transfer funds to an interest-free credit card to save while paying off your debt.7
Forcing yourself to pay for everyday expenses in cash or by check could slow down the impulse to spend and get you to think twice about what you really need instead of what might be nice. Research shows that you spend 20 percent more when using a credit card because it is “less painful” than pulling out cash to pay or taking the time to write a check.8
In looking for the best place to keep that hard-earned money you’re saving, check out online savings accounts vs. those offered by brick-and-mortar banks. Online savings accounts generally offer a better interest rate than traditional brick-and-mortar banks.9 Check to make sure your account doesn’t have onerous bank fees.
Do you really need subscriptions to all of those premium cable channels AND three or four online streaming services? Did you remember to cancel your old music subscription service when you switched to your new one? What about all those other “free” offers that you started to pay for after the introductory phase ended? Paying an extra $50 or $100 a month on services you don’t really use can add up.
Finally, whether it’s implementing these savings ideas or others from articles around the web, try spending just one hour a month to put these changes into action. You may be able to see results sooner and feel better about your ability to save and get more control over your expenses—and your life.
The Bottom Line
Many of us find it really hard to put into practice the savings techniques we know we ought to follow. The good news is that just taking small steps, seeing incremental improvements, and spending a small amount of time on a regular basis to monitor your results, can lead to substantial savings.
Start Saving Now
This article has been prepared by a third party and is made available to you for information purposes only. This third party article does not represent the opinions, views or analysis of American Express, and American Express does not make any representations as to its accuracy or completeness. If you have questions about the matters discussed in this article, please consult your own legal, tax and financial advisors.
†Accounts offered by American
Express National Bank. Member FDIC. Each depositor is insured to at least $250,000 per depositor, per insured bank, per ownership category.
*The Annual Percentage Yield (APY) as advertised is accurate as of . Interest rate and APY are subject to change at any time without notice before and after a High Yield Savings Account is opened.
For a CD account, rates are subject to change at any time without notice before the account is funded. The rate received will either be (i) the rate reflected during your application process or (ii) the rate being offered when your CD is funded, whichever is higher. All CDs must be funded within 60 calendar days from the time we approve your application or will be subject to closure. The interest rate and Annual Percentage Yield (APY) will be disclosed in your account-opening documents, which you will receive after completing your account-opening deposit. After a CD is opened, additional deposits to the account are not permitted. Early CD withdrawals may be subject to significant penalties which could cause you to lose some of your principal. Please see the Deposit Account Agreement for additional terms and conditions and Truth-in-Savings disclosures.
**The national rate referenced is from the FDIC's published Monthly Rate Cap Information for Savings deposit products. Visit the FDIC website for details.
‡For purposes of transferring funds, business days are Monday through Friday, excluding holidays. Transfers can be initiated 24/7 via the website or phone, but any transfers initiated after 7:00 PM Eastern Time or on non-business days will begin processing on the next business day. Funds deposited into your account may be subject to holds. See the Funds Availability section of your Deposit Account Agreement for more information.
♢Calculations are estimates of expected interest earned. Actual results may vary, based on various factors such as leap years, timing of deposits, rounding, and variation in interest rates. The first recurring deposit is assumed to begin in the second period after any initial deposit.
§IRA Contributions are subject to aggregate annual limits across all IRA plans held at American Express or other institutions. IRA distributions may be taxed and subject to penalties based on IRS guidelines. Required minimum distribution, if applicable, is only relevant to this IRA plan and does not take into consideration other IRA plans held at American Express or other institutions. Please see IRS.gov for more information. We recommend you consult with a financial or tax advisor when making contributions to and distributions from an IRA plan account.