Today we’re going to talk about the big four-letter ‘S’ word. No, not that one! We mean SAVE. For many, the thought of saving feels like a sweet old-fashioned gesture, harkening from the days of penny candy and two-bit loaves of bread (that’s 25 cents for you young-heads out there).
In a world where debt is as ubiquitous as credit cards, saving actual pennies for a rainy day (or even a new house or car), can seem obsolete. The instant gratification that comes with charging your purchases can cost you handsomely in the long run though. Americans currently owe nearly $4 trillion in credit card debt.1
If you find yourself in the credit card debt hole, know that you’re not alone. But more importantly, you can get out of credit card debt, but it will take work and a bit of sacrifice through adjusting spending behaviors, lifestyle expectations – above all – savings habits.
Americans are notoriously overly optimistic about their spending and savings habits… and yet the numbers speak for themselves. With an average percentage rate of 19.24 percent2 (some nearly 40 percent) and annual fees as much as $5003, the cost of carrying a balance on a credit card far outpaces the average rates of return for savings accounts (roughly 2 percent give or take depending on your account and market situation).
Unofficial polling has found that Americans are far more willing to discuss intimate life details than the amount of money they have in the bank. In fact, the entire subject of money seems to be taboo, but clearly, it’s a conversation we should be having. Regularly.
There is a certain level of embarrassment most Americans feel towards their ‘bad’ money management skills. But we ask: how are you ever supposed to improve your finances unless you talk about your situation and learn how to flex those good savings muscles?
Although it may seem counterintuitive, saving for an emergency is the first step. Did you know that nearly 40 percent of Americans don’t have $1,000 in savings for emergencies?4 Without that buffer, unexpected house maintenance, car repairs or medical bills usually end up on, you guessed it, a credit card.
You may want to go gung-ho and start dumping money into stocks, mutual funds and other investment accounts to get higher rates of returns, but we recommend checking that urge. The point of a savings account is to have liquid funds you can access right away in the event of an emergency, without being charged early payout fees or waiting for payment processing.
For many, $1,000 may seem like too lofty of a goal. So, start small. Can you put away $50 a month into an emergency account? Even $5 a month is better than nothing. Starting early, no matter how small, and when the inevitable unexpected bill comes, you’ll be more prepared to deal with it. Of course, this is just the first step on a road to better financial health overall.
Need help getting started? Let’s lose the rose-colored glasses, shed the judgments, and tackle those tough savings subjects. We’ll take the time to sit down with you, as often as you need, to map out a savings plan that works best with what you have and where you are on your journey. Stop in today to learn more about becoming a savvy saver.