Creating savings habits to support ‘future you’

The good news is if you created a monthly budget already (or are working on one), you’re taking the first step to financial wellness. Next, you’ll want to turn your attention to saving.

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According to Forbes, “28% of Americans have savings below $1,000.” This number doesn’t discriminate across generations either as “this is the case of 32% of Gen Z’ers, followed by Millennials at 31%, Gen X at 27% and Baby Boomers at 20%.”

Savings is a big topic and there’s a lot to touch on. To get started, it might help to think of saving as “paying yourself first.” It’s important to think of the costs that “future you” will have – that could certainly be retirement, but what about costs even later this year?

Maybe you’re thinking about new tires you need to budget for, or the vacation with your kids that you would love to take. Maybe it always felt out of reach, but you could save your way towards it.

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If you follow the 50/30/20 rule of budgeting, that would mean 50% of your income covers your needs, 30% your wants, and 20% for saving. While you may need to adjust percentages to fit your situation, it’s a good place to start.

The simplest way to save is to make it automatic. This could be set up for each payday (if you get paid weekly or bi-weekly) or you can set it up for a monthly transfer. Determine what amount can be set aside for saving and set up an automatic bank transfer.

For example, maybe you have $50 from each paycheck which automatically goes into a savings account. If you are paid bi-weekly, at the end of one year (without taking interest into account), you will have $1,300 from the one automatic transfer each pay. This is a great start and we will cover more about saving at the end of the week.

Saving for exciting financial goals is great, but one of the best ways you can start to help “future you” is building an emergency fund.

An emergency fund is exactly what it sounds like – a savings set aside for unexpected expenses such as home and car repairs, medical bills, or loss of income. Surprising costs seem to happen at the worst times, but an emergency fund can help you fund life’s sudden costs. 

How much to set for an emergency fund goal depends on your unique situation. Getting started is often the hardest part. Any amount you can set aside for unplanned expenses can help you down the road.

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Additionally, a good way to build up your emergency fund is to add to it when you receive money outside of your expected monthly income. For example, if you receive a tax return, consider setting some of those funds aside to help build your emergency fund and you will be thankful for these resources when you need them most.