One of the biggest reasons that people save money is to build an emergency fund. This way, they have something to fall back on in case of financial difficulties. Many parents also work hard to save money for their children’s education.
Another reason that people save up is for a big purchase in the future, such as a car, a dream home, or perhaps that long-awaited vacation. Many of these are “one time, big time” things, so the cost can be a little intimidating. Nevertheless, it’s not impossible to save a big amount of money for these purchases. You just have to be strategic about it. Here are some tips:
Set a Target
To make it easier for you to save money for whatever purpose, you need to set a target first. This amount can either be the partial or full cost of what you want to purchase. For example, your savings target could be the downpayment for a car or the price of a trip to Boracay.
It’s also wise to include other expenses folded into that cost. Given the examples above, for instance, your downpayment for a car may also include processing fees from the dealer. Meanwhile, a trip to Boracay doesn’t just involve the price of a plane ticket; you should also include the cost of your accommodations, food, as well as pocket money.
Once you’ve set your targets, it will be easier for you to work towards that amount.
Open a Separate Bank Account
To make sure that you don’t mix up your savings with your day-to-day accounts, it’s best to have a separate place to keep the money. You could make use of the envelope method, or you can open a bank account. Fortunately, some banks offer Online Bank Account Opening for your convenience. For the fastest processing, choose a simple or standard savings account; this will more than suffice, especially if you’re not looking to earn high interest.
Keeping your savings separate from your other accounts will help you keep track of your target amount. More importantly, it will prevent any accidental spending that will set you back from your goals.
Set Up a Schedule and Automatic Transfers
Once you have your bank account ready, the next step is to ensure that you’re funneling funds into it. The best way to approach this is to set a specific amount and a schedule, say Php 1,000 every pay day. You can also calculate based on the end date. For example, if you want to save Php 20,000 within 10 months, then you should save Php 2,000 per month.
Once you’ve figured out an amount and schedule, commit! If you can, set up automatic transfers using an e-wallet or your bank’s own app. This can give you more peace of mind, since you don’t have to consciously think about saving up. You can also achieve your goal faster.
Remember the 50-30-20 Rule
The 50-30-20 rule means you should allocate 50% of your income to necessities, such as food, rent, and utility payments. The 30% and 20% is for your wants and savings, respectively, although they can be switched depending on your priorities.
Of course, this isn’t a hard and fast rule that you must absolutely follow. Nevertheless, 50-30-20 can help you simplify the way you save without compromising your needs.
Try to Minimize Other Expenses
If you want to reach your savings goal faster, try to cut down on your other unnecessary expenses. Even small purchases—such as a large coffee from a specialty shop or a fast food order—can add up to a considerable amount.
This doesn’t mean that you should deprive yourself of little luxuries. Again, the key is to minimize and not eliminate. If you’re used to going to your favorite coffee shop every day, then why not go only twice a week? If you’re always ordering food from restaurants, consider learning how to cook simple dishes. This is not only friendlier to your wallet, but also for your overall health!
If It’s a Long-Term Purchase, Invest
Sometimes, the thing you’re saving up for is a long-term goal; a good example here would be a house or your child’s college education. If this is the case, then you might want to invest part of your savings so it can grow. The simplest approach to this is by opening a time deposit or a high-interest savings account. You can also contribute to a mutual fund for a higher rate of return.
Before investing, however, make sure you’re well informed of the pros and cons. For example, if you open a time deposit, your money will earn higher interest than a regular savings account. However, you will not be able to withdraw your savings before the agreed-upon period unless you pay a sort of penalty for early withdrawal.
In the end, everyone has different approaches when it comes to saving money because everyone has different financial situations. Still, all of these show that you can make saving money a little easier to do. Ultimately, what you need is consistency and determination to reach your goal.