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How to Build Savings

(Stash It)

It only takes one financial emergency to convince you of the importance of savings. It’s recommended that everyone aim to save 3- to 6-months’ worth of expenses, which might seem like an impossible target, but every achievement begins with setting a goal and taking the first steps toward reaching it.


Life is full of surprises — an accident, injury, illness, home repair, legal issue or even a fun opportunity such as an unexpected vacation, festival or concert are all good reasons to build up savings. With no money saved, your options are limited to earning the money or borrowing it, which usually means paying interest. Learning how to build a savings account makes you self-sufficient. You can stand on your own without relying on anyone else to bail you out.


Saving gets easier and more enjoyable the more you do it. At first, you might feel deprived if you have to trim expenses, but this feeling quickly subsides when you see your account balance rising.

A few options for starting small:

  • Round up your purchases. There are apps that “round up” the difference from your debit card purchases and deposit the change into a savings account. For example, if you buy something for $6.50, the app deposits 50 cents into savings. Over time, these pennies start to grow, similar to a virtual piggy bank or change jar. (You also could start a change jar in real life.)
  • Hunt for ways to trim expenses. Pay attention to small daily purchases that could be cut to find money for savings as well as recurring bills that could be reduced if you got a got a better deal on your phone, utilities, cable, streaming services, insurance and other fixed expenses.
  • Make it automatic. Set up automatic transfers from your checking to your savings account or straight from your paycheck into savings. Even if it’s only $5 or $10 a month to start, every little bit helps. And when it’s automatically deducted, you likely won’t miss it.


One of the easiest times to kickstart a savings habit is when you receive a large influx of cash — such as an inheritance, tax refund, gifts for graduation, birthdays, holidays and any other boost in income. If you get a bonus or raise at work, instead of spending more, stick with your current budget and slip the rest into savings. If you plant this seed money in an interest-earning account, then the more you start with, the faster it will earn interest and the bigger it will grow.

In addition to short-term emergency savings, long-term savings are essential if you’re going to stay ahead of inflation. The average rate of inflation is estimated at about 2-4% per year. That means if you keep your money in cash, it will buy 2-4% less next year than it does this year. If you deposit it in a basic savings account, you’ll be lucky to earn 1%, so you’re still losing purchasing power. You could earn a slightly higher return in a certificate of deposit (CD) or money market account, but the best way over time to make sure you’re beating inflation is to invest.

Investing is a long-term strategy — in order to get the most benefit, you should plan to keep your money invested for 20 or 30 years. But the good news is that historically, investing in the stock market delivers returns of 8-10%. The downside is that your money isn’t easily accessible. This is why it’s important to keep a significant portion of your savings (3- to 6-month’s worth) in an account that gives you more “liquidity,” meaning that you can withdraw funds easily, without a lot of penalties or fees.

Start with a basic savings account and sock away as much as you can — including extra pennies and trimmed expenses. Then “go long” by investing in your workplace 401(k) or opening your own investment account.

As always, we’ve got your back. — The On Your Own Team End of article insignia


[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by On Your Own, the National Endowment for Financial Education or any of its affiliate programs.]