The Easy "Multiply Your Savings" Plan

When I was growing up, both of my parents often said it was important to save money.  I know they put money into a savings account every month.  But they also withdrew money from savings whenever the checking account ran low, and my mom complained that it was "impossible" to keep money in savings.

For many, many years, I followed the exact same pattern.  My savings account was just a place to stash money until something "came up."  It was "on hold" until then.  Yes, my husband and I could always pay our annual auto registration and car insurance.  We could pay for our kids to attend summer drama camp, which they loved.

But we never accumulated savings.  The amount never rose above a few hundred dollars.  We were basically spending everything we earned – only moving some of it into "shelter" for a few months before spending it.  There was no margin in our budget.

Finally, Jon and I dug ourselves out of five-figure credit card debt and learned to get paid to save money.  Really save it.  To keep it in savings for whatever long-term needs arise.

The first step

Jon and I are very fortunate that when he decides to retire, he'll receive a generous monthly stipend from California's State Teachers' Retirement System.  This year has been his 40th as a teacher, and he has taught in California public schools for 35 years.  For every one of those 35 years, Jon has paid from his salary into the Defined Benefit fund and the Supplemental Benefit fund.

I say that Jon has paid, but the fact is that the payments have been withheld.  It took no decision on our part.  Just like taxes, the money was automatically deducted.

And that's the first important step to building savings.  You don't just save if you can "afford it" this month.  You set up an automatic deposit system for the amount you decide on ahead of time.  Like we did, you learn to live on what's left.  Financial advisers call this paying yourself first.

Start small.

Saving money doesn't have to be a big deal.  You just need to find as much margin in your budget as you can.

How do you find margin?  You don't need to pinch pennies.  Evaluate your budget to locate one to five monthly bills that can be eliminated altogether (think subscriptions, memberships, and the like).  Next, look at expenses you can trim without pain.  For example:

• Trim $10-$20 a week from the grocery bill.  (Eating less meat will accomplish this right away.)
• Trim $10-$20 a week from eating out.
• Have Starbucks twice a week instead of every day.
• Use your creativity to cut costs on entertainment and gifts.
• See if airing up your tires and driving the speed limit can save you a gallon of gas each week.

You probably won't even miss this money, and it should be pretty easy to adjust to doing without it.  Now all you have to do is transfer your newly-freed funds to a high yield savings account or money market account.

How much should I save?

The truth is that saving anything is better than saving nothing.  Saving anything long-term is better than shuffling money into a savings account only to take it back out a few weeks later.

I use high yield money market accounts and 3- to 12-month certificates of deposit at my credit union.  Credit unions are designed to facilitate savings (though most offer checking accounts too), so they tend to pay higher interest than most banks.  I bet there's a credit union not far from where you live.

Of course, there are online options as well.  I don't use them myself, but the Nerdwallet website is one I trust for solid financial information, and their Compound Interest Calculator has a feature that lets you see the current highest interest available in online savings, money market, and CD accounts.

Their handy calculator will also let you see that an initial deposit of just $100, followed by additional monthly $100 deposits, at 5% annual interest (what I'm getting from my credit union right now) continued for 10 years, will amount to almost $15,600.  Here's the thing:  $3,600 of that is free money (interest).  That's money you get paid for saving.

If you can start with $200 and automatically deposit $200 every month, at 5% interest continued for 10 years, you'll have nearly $31,200.  You get paid $7,200 for doing something that's good for you.

Now if only I could get paid to eat broccoli.

Just 3 steps to multiply your savings.

This is not your Grandma's savings plan.  You don't have to scrimp and stuff your hard-earned cash into the cookie jar.  Take just three steps:

• Open your account.
• Automate your payments.
• Get paid to save.

Extra credit:  Hey, those raises, tax refunds, side hustle earnings, and birthday cash can also be added to savings.

If you have struggled to save, and worry about the volatility of the stock market, your local credit union is a great place to get started.

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