The Secret to Successful Saving — The Bank of You

Earlier this year Bankrate.com reported that only 38 percent of Americans have enough savings to handle a $1,000 emergency room visit or a $500 car repair. Both expenses can become even more expensive if covered  by credit cards that are not paid off each month or — far worse — payday loans with fees that can be up to 500 percent or more.

Why is it that so many households have little or nothing in savings? It is not just a problem of people with limited incomes. There are plenty of people making above-average incomes — sometimes six-figure salaries — who still put little in savings.

There are some people who by nature are savers. For them it is no problem to make savings a priority and make it the first thing they do on every payday. We all know those tightwads who shop at second-hand clothing stores and drive 10 year old cars. Good for them, but what about the rest of us? How does a non-saver save?

Savings just won’t happen if you decide to save whatever is left over after you spend your paycheck. Instead, set up an automatic transfer of $100, $50, or $25 from your checking account to your savings account every pay period. The amount is less important than the action of making this automatic. Take it off the top and you can’t spend it.

It is way too easy to overspend on clothing, food and entertainment. You will be surprised how much you will save if each payday if you use a cash envelope system for these three areas. For example, if you put $100 in your clothing envelope, you can spend up to this amount, but to spend more, you will have to wait until you can refill your envelope from your next paycheck. This may seem old fashioned when it is so easy to spend using plastic or your phone. However, psychologically it is harder for most people to spend cash, so you should consistently spend less. Of course, you can’t spend money from an empty envelope.  Many people who convert to an envelope system find themselves spending hundreds fewer dollars month after month. Put that extra money in your savings account.

One of the reasons many of us overspend is “stuffitus.” Recently Time Magazine reported that most Americans can’t put their vehicle in their garage because it is full of unused stuff. To give a boost to your saving, sell off your unused, dust-collecting possessions and put the money in your savings account.

If you are able to pay for emergencies from your saving account, you won’t have to borrow money. The interest you save can add even more money to your savings.

Cars and appliances are going to break down. Kids are going to break bones and windows. You need an emergency fund because everyone has emergencies. Following these steps should fund your emergency savings fund within a few weeks or months. A good goal is $1,000. This won’t cover all emergencies, but it is a great start.

If you want more help saving up an emergency fund, consider attending Financial Peace University^®. The average participant is able to add $2,700 to savings within three months. Questions? Email Supersaving@zionsbank.com.