Easy Savings Tips
The following savings strategies provide advice on how to make it
easier to save. You may also find the
helpful in this regard.
How to Make It Easier to Save
- Save early and often. Start saving the day the baby is
born, if not earlier, and save as often as you
can. The sooner you start, the more you can take
advantage of compounding to watch your savings
grow. It will also help you get into the habit of saving.
- Save as much as you can. If you don't think you can
afford to save, start small. You will find that you will
adjust your spending habits, and can gradually
increase the amount you save. Don't worry too much about starting
small, since the compounding of interest over time will help your
savings grow. The first step is to get into the habit of saving.
- Save regularly. Rather than save money at random
intervals, try to save a little every month. The more frequently you
can save the better, but at the very least save once a year.
If you can save with the same frequency as you receive your paycheck,
you will find it easier to get into the habit of saving.
- Make saving automatic. Sign up for payroll deduction or
ask your bank to automatically move money from your checking account
to your savings account every month. Many state section 529 plans have
options where you can have money transferred from your checking
account every month. If the money isn't in your checking account,
you'll be much less likely to spend it.
- Earmark savings for college. Use a special account
designated for college (but in the parents' name, not the
child's). This will help you save, because it will motivate you to
- Establish a goal. If you specify a
you'll be able to measure your progress toward that goal.
- Invest windfalls, don't spend them. If you should get a
windfall, such as an inheritance, winning the lottery, a large income
tax refund, or a bonus at work, put it in the college savings fund. It
is better to save than to spend.
- Increase the amount you save each year. Increase the
total amount you save each year by at least 5%. So if you save $100 a
month this year, you should save at least $105 a month next year. This
will help your savings keep up with the
college tuition inflation rate.
When you get a raise, increase the amount of money you save.
- Ask relatives to help. Set up a section 529 plan, and
ask relatives (especially the grandparents) to contribute money to the
plan. 60% of grandparents say that they would contribute to a section
529 plan if asked, especially since they know the money will be spent
on the child's education.
- Redirect old regular payments towards the savings goal.
Whenever you have a regular payment that stops, try shifting the money
you were previously paying into college savings. Since you were
already used to spending that amount, saving it should be relatively
painless. For example, when your children enter kindergarten, redirect
the money you were previously spending on daycare to college savings.
- Review your living expenses. Create a monthly budget that
reflects your actual spending habits, and try to identify living
expenses you can cut. Any time you cut your expenses, redirect the
money toward savings. For example, if you turn down your thermostat to
save on heating costs, put the money you save in the college savings
- Use it as an opportunity to teach your children. Involve
your children in the investment decisions. Since it involves their
future, it is a good opportunity to educate them about the benefits of
saving. For example, you could allow them to manage a small portion of
the investment portfolio and track its growth. Some parents will even
set up a "matching" plan, where money the child saves for their
education is matched by additional money from the parent. Delayed
gratification is a hard concept for younger children (and even some
adults) to appreciate, so encouraging it early will help establish
good habits. You will also find that acting as a role model for your
children will make it easier for you to save as well.
Before you start to save for your child's college education, get the
rest of your finances into good shape. Pay off your credit cards (and
get rid of them if you'll be tempted to run up the balances again) and
maintain a cash reserve equal to six months salary as a cushion
against job loss. Be sure to save for your retirement as well, maxing
out the employer's matching contribution.