How to start saving money
Table of Contents
Key Takeaways for Saving Money Smartly
- To start saving money effectively, begin with clear, realistic goals and monitor your progress through digital budgeting tools or multiple savings accounts.
- Use the 50/30/20 rule to create a balanced budget that supports both spending and saving, and apply the 30-day rule to reduce impulse buying.
- Focus on eliminating high-interest debt, such as credit cards, to create a solid financial base.
- Prioritize building an emergency fund to shield yourself from unplanned expenses.
- Make saving money easier by automating transfers, using savings apps, and keeping your checking and savings accounts at different banks.
When your bank account is empty, saving money may seem unachievable, but the reality is that you don’t need a large salary to get started. It’s never too late to start saving money, regardless of whether you’re living paycheck to paycheck or haven’t developed the habit yet. You can start altering your financial future gradually with a change in perspective, a few clever tools, and useful tactics.
Surprisingly, only about 44% of U.S. adults can cover a $1,000 emergency from savings, according to Bankrate’s latest emergency savings survey. That means most people are one unexpected bill away from financial stress.
While increasing income is undoubtedly beneficial, there are other ways to begin saving. The secret is to start with what you have, no matter how small, and work your way up from there. Start now rather than waiting for “the right time.” These seven astute suggestions will help you increase your savings now rather than later.
1. Set clear savings goals
Understanding the precise reason behind your savings is the key to successful money management. Having a clear, specific goal gives your saving purpose and keeps you motivated, whether you’re saving for an emergency fund, a future home, or that ideal vacation.
Put your goals in writing, such as “first home,” “new car,” or “honeymoon,” and choose when you want to achieve each one. After you’ve set a deadline, break it down by calculating how much you must save each month to reach your goal.
Creating individual savings accounts for each of your goals can make a big difference. This method not only helps you stay organized, but it also allows you to monitor your progress more easily. And here’s the kicker—you can move your funds to whichever account offers the best interest rate, helping you earn a little more while saving money.
2. Create a budget that works for you
Making a budget doesn’t have to be difficult or overwhelming. Essentially, the purpose of a budget is to ensure that your expenses are lower than your income. Selecting a budgeting approach that works for your lifestyle and facilitates money saving is more important than having expensive tools to get started.
One popular method that many people find helpful is the 50/30/20 rule. Here’s a quick breakdown:
50% of your income should cover essentials like rent, groceries, and medical costs
30% goes toward non-essentials—think hobbies, entertainment, or dining out
20% is set aside for saving money and paying off any debts
To begin, monitor your income and expenses for a full month. Break everything down into three categories: needs, wants, and savings. If your current spending doesn’t match the 50/30/20 split, look at where you can trim or adjust to prioritize saving money.
Another great tip is the 30-day rule. Here’s how it works: if you’re tempted to buy something that isn’t essential, wait 30 days before purchasing. That pause gives you time to think—do you really need it, or is it just an impulse? This simple habit can be surprisingly effective at helping you save more and spend smarter.
3. Tackle high-interest debt
One of the largest obstacles to saving money may be high-interest debt, such as credit card balances. More than half of American credit card users carry a balance each month, according to a recent Bankrate survey. Interest rates typically range from 20% to 30%, so the expense mounts up rapidly.
Let’s say you have a credit card debt of $5,000 with a 25% annual percentage rate. You might have to pay an additional $1,579 in interest before you are debt-free, even if you are paying $300 a month. You could have put that sizeable sum of money directly into your savings account.
It might not seem like paying off debt is a form of saving, but in reality, wiping out high-interest debt means you’re saving money by avoiding those sky-high interest charges. In the long term, freeing up that money gives you more flexibility to build your savings and work toward your financial goals.
4. Build your emergency fund
There are many surprises in life, and not always positive ones. Unexpected medical expenses, unforeseen auto repairs, or even losing your job can be very stressful. One of the best financial decisions you can make is to set aside money for emergencies.
The ideal amount to save is three to six months’ worth of essential living expenses. Store this money in a different account that you can easily access when you need it. Start with whatever you can afford, such as $50 or $100 per month, if that seems excessive. Consistency is crucial. You can create a financial buffer that will help you stay on course no matter what life throws at you by making saving money a monthly habit.
5. Automate your savings
Making it automatic is one of the best and easiest ways to consistently save money. You can build your savings without even thinking about it by simply setting up a recurring transfer from your checking account to your savings account each payday.
These days, a lot of banks provide useful tools like round-up features. These transfer the spare change into your savings account and automatically round up your debit card purchases to the closest dollar. Even though it might not seem like much, these small contributions can add up over time.
You can also use handy money-saving apps like Digit or Qapital. These apps keep an eye on your spending habits and move small amounts into your savings whenever it makes sense. It’s a simple way to stay on top of saving money without changing your lifestyle.
6. Separate your spending and saving
Try keeping your checking and savings accounts at different banks if you frequently find yourself tempted to spend your savings on impulsive purchases. This small action can help you focus on saving money by establishing a mental boundary between the money you’re trying to protect and the money you spend.
The founder of Brunch & Budget and certified financial planner Pamela Capalad says, “When both accounts are in the same app, you naturally combine the balances and think, ‘That’s what I can spend.'” “However, when they’re totally distinct, you forget about it, which helps you maintain your savings objectives.”
7. Find extra money to save
Spending less is frequently the first step towards saving money; it’s not always about raising income. Examine your monthly spending to find wasteful spending areas, such as subscriptions that aren’t used or impulsive purchases that you later come to regret.
Try “temptation bundling” if organizing your finances seems like a chore. This entails combining an activity you like with one you don’t. For example, limit your listening to to your favorite podcast while you check your spending or terminate any subscriptions that aren’t needed.
According to Mariel Beasley, co-director of Duke University’s Common Cents Lab, “it’s a way to make a tedious but necessary task more enjoyable.”
Additionally, consider small ways to boost your savings. You might take on a side gig, sell items collecting dust, or directly deposit birthday or holiday money into your savings account. Every small step adds up when it comes to saving money.
FAQs
1. What should I save for first?
Start with clear, specific goals—such as building an emergency fund, saving for a vacation, or buying a car. Assign each goal its own savings target and deadline to stay motivated.
2. How much of my income should go into savings?
A popular budgeting rule is the 50/30/20 rule:
50% for necessities (e.g., housing, food)
30% for wants
20% for savings and debt repayment
Track your spending monthly and adjust so you align, or come as close as possible.
3. What’s the best way to build an emergency fund?
Aim to save 3–6 months’ worth of essential expenses in a separate, easy-access account. Start small (even ₹500–₹1,000/month), automate regular contributions, and gradually raise the amount.
4. How do I manage and pay off high-interest debt while saving?
Prioritize paying off high-interest debt (like credit cards) because its interest (20–30% APR) can negate any savings interest. Once cleared, redirect that money toward your savings goals.
5. What strategies can help automate and protect my savings?
Automate transfers from checking to savings each payday.
Use round-up tools or saving apps (e.g., Digit, Qapital).
Keep checking and savings at different banks to reduce temptation to overspend.
The Bottom Line
Although it may seem impossible to start saving money from scratch, it is possible with small, regular steps, such as tracking spending, establishing reasonable goals, and utilizing automated savings tools. Even if it’s only a few dollars at a time, the important thing is to start where you are. These modest steps can eventually provide you with a solid financial base, greater control, and peace of mind regarding your future.
