Saving money seems like an easy venture – just make sure you spend less than you make and put some money away for the future. Despite this, most Americans are saving less than then before due to harsh economic conditions and inflation. As of 2023, 39% of Americans are saving less than the prior year, and 10% have no savings compared to 2022. The average savings rate is 6.2% of income. 40% of households have at least 3 months of living expenses saved, which is the recommended amount for an emergency fund. Why do people have so many challenges saving? Besides increased expenses, there are many psychological reasons that limit people’s ability to save.
Your attitude about money, including spending habits and financial goals, has a major impact on your willingness and ability to save. If you feel that money is a challenge to obtain and is a scarce resource, you’re more likely to spend and make impulsive purchases. As a result, your desire and willingness to save money is decreased. On the opposite spectrum are people that believe money is a tool to help achieve long term goals. This attitude is a more motivating factor for saving money and having an emergency fund. Spending habits and financial goals also have a major impact on how you save. If you’re the type of person that frequently makes purchases that you don’t need (and just want), or are more likely to make unplanned, impulsive purchases, you may find it challenging to save money. In addition, if you have FOMO (fear of missing out) or have trouble with self-control, you’re less likely to save. If you have clear cut financial goals and a plan/budget, you are much more likely to be a saver. Having specific goals helps people be motivated to start and maintain savings. Some common goals include savings for big ticket items, such as a down payment for a house, saving for college or buying a car.
There are steps you can take to help change your saving mindset and attitude to motivate you. An important first step is to reflect and understand your own attitudes and beliefs about money. Think about any negative patterns you may have or thoughts that hinder your willingness to save. Address any issues and try to turn them into a positive mindset about money that will encourage you to save.
Creating a budget and setting financial goals is a strong way of motivating you to save. A budget that tracks your income and expenses will enable you to see if and how much money you have to put aside for savings. A budget can also help you identify areas where you can cut spending in order to have money to save. Along with a budget, setting specific financial goals forces you to save money. If you want to make a specific purchase or investment, you will need to put together a plan to save for these things.
Another tool to help you save is to automate your savings. Most banks have the option for you to automatically transfer a specified amount of money from your checking to your savings account at a specified interval, such as monthly or weekly. When you do this, you won’t even think about it or have to take any action. It’s a “set it and forget it” process, and you will automatically put money into savings. The “24-hour” rule will help you avoid making unneeded, impulsive purchases. If you have the urge to buy something unplanned, take 24 hours to think about it and reflect on whether you truly want or need it. Finally, implement a mindset of gratitude, by being thankful for the things that you have already, both financial and non-financial. This type of thinking helps you appreciate what you already have and minimize the need to make purchases of things that you don’t really need.
OPINION
Save, save, save! Many people are reluctant to save for a variety of reasons. But saving is a significant part of smart financial planning. Whether it’s for an emergency fund or saving for a big ticket item, it’s important to put aside some money. In order to do this effectively, you need to create a budget, so you know exactly how much money you are able to put into savings. If it’s not enough, the budget will show you where you can cut expenses so that you can save more.
