We all know the importance of saving money, but unless we make it a priority the opportunity will pass us by. Could you set aside $5 a day? Be intentional...give up something. Actually save $5 every single day and deposit that $35 weekly in your savings account. If you would commit to doing this single thing in about 45 years when you are ready to retire you would have saved over $300,000? Yes...you read it correctly, three hundred thousand dollars! We used the example of a savings account that earns 5% interest, contributed to weekly, and the interest compounded monthly. Now if you had set aside $5 a day and buried it in the back yard, you would only have $82,125. That’s quite a difference! As interest earned is added to the money already in your account (the balance), the total amount of money in your account grows! You are earning interest on the interest! The secret is...TIME! Compound interest is magic! Interest rates, which are regulated by the U.S. Federal Reserve Board, are constantly changing, so if the rate increased to say 10%, instead of having $308,129 in 45 years you would have saved a whopping $1,597,991! Yep! Over 1.5 million dollars! That’s IF you make savings a habit...don’t buy that bag of chips and Dr. Pepper every day...put that $5 in a savings account and plan for your future. Your older self will be so grateful that your younger self was financially savvy! Sweet!
You must have a plan to build savings.
Honestly, you have to make yourself save money...it’s much easier to spend than save! It’s a habit you have to build over time. Some good advice is to have a specific amount taken directly out of each paycheck...before you can spend it! Set a goal and stick with it. Savings is a habit that’s built over time; it doesn’t happen overnight. Know that ANY amount you set aside helps you reinforce the habit of saving. Following are a few strategies to help put your savings plan into action!
Pay yourself first.
You are a priority! If you get in the habit of putting back even a little money each month into a savings account, it will become a habit. Then as your income increases, you can pay yourself a little more!
Make it automatic.
If you want to experience financial freedom, make saving money a habit. When you are paid by your employer, have a set amount automatically transferred to your savings account. You probably won’t even miss it! Out of sight, out of mind! In this case that’s a good thing, because you are building a nest egg that will help you reach your long-term goals.
Adjust your income withholdings. .
When you are employed you fill out a W-4 form that declares how much of your paycheck will be paid upfront toward any taxes you may owe for that calendar year. Basically, you are paying any taxes you might owe before you even know what you are going to owe! If you are receiving a tax refund every year, then you may want to consider amending your W-4 with your employer to adjust your withholdings. Wouldn’t you rather have a larger monthly paycheck than to have to wait for a refund when you file your taxes? But! Don’t spend that extra money you are receiving...save it! Adjust your W-4 wisely, you don’t want to owe money when it is time to file your return. Also, be aware that life changes, like getting married, or having a child, may impact the amount of taxes you will owe. In these cases, you will probably want to file a new W-4 with your employer to adjust your withholdings.
Whenever you save money by choosing the less expensive option, put that money into savings! If you purchase an item on sale and save $15, put that money in savings. It’s shopping math! Skip that expensive latte, pack a sack lunch, reduce your cable bill...all of these ‘cuts’ will put more money in your pocket! When creating your budget, you will identify recurring monthly charges that could be modified like cable, phone, or streaming services. Reexamine your budget and ‘cut’ things you could live without. Saving money is definitely being responsible, but don’t ‘cut out’ everything you enjoy! Every budget needs a little room for fun.
Put away windfall money.
When you receive money, you weren’t expecting it’s tempting to splurge and spend it on items you have been wanting...not really needing! Instead, if you make saving a priority you will have many more options later. Try it for 6 months! You will be so proud of your growing nest egg for the future!
“By recording your dreams and goals on paper, you set in motion the process of becoming the person you most want to be. Put your future in good hands – your own.” — Mark Victor Hansen Great advice! Remind yourself why you are saving by posting pictures and notes where you will see them regularly so that you will be motivated to reach your goal. Your goal may be to buy a home someday, pay for your education, or plan for a trip around the world! Set that goal...and go for it!
You can do this! You CAN save money while you are in college... here are more tips!
Are you an ECU student?
If you are enrolled in Tiger Connect (formerly Freshman Seminar) or another course that encourages you to get your finances in order, then continue to the CashCourse tab under Flight Plan and begin your assignments chosen by your instructor. Remember to always choose the correct instructor before completing your assignments. If you are on this website because you are determined to get control of your finances and are choosing the self-study option, then also continue to the CashCourse tab, create an account if you haven't already done so, then choose the topic "Save and Invest". There you will find resources to help you make informed financial decisions. It's empowering when you choose to set your course for success!
This information presented in cooperation with Oklahoma Money Matters, the financial education outreach initiative of the Oklahoma College Assistance Program (OCAP), an operating division of the Oklahoma State Regents for Higher Education. For more information about OKMM, visit www.oklahomamoneymatters.org or call 1-800-970-OKMM.