The general advice given for how much money you should have in your savings account at all times is enough to cover three to six months of expenses. This needs to be enough to cover your bills, mortgage, rent, and other parts of your life. It’s also smart to have extra money in your savings in case of an emergency, like if you get hurt or your car breaks down.
Overall, there are several reasons to have a healthy savings account, yet half of all Americans have less than three months of savings. This is not a great place to be if you end up in a tough situation like getting laid off or getting sick.
We’ve identified three methods to grow your savings and will walk you through the benefits of each, along with the cons to help you figure out how you should grow your savings.
Have a Budget and Know Your Situation
You need a budget, and not just a scrambled note on a piece of paper of what bills you need to pay every month, but a comprehensive budget detailing how you earn and spend your money.
Start with your monthly income at the top. Then, list out your regular bills, like your rent/mortgage, utilities, loans, and other things you pay monthly. After that, get an idea of what you spend on other things each month on more flexible items, like groceries, eating out, and buying non-essentials. If you are a Pioneer member, you can see these items by going to your debit or credit card and looking through your payments. Get an average of a couple months to see what you spend on average. To do this, login to myPioneer Online and Mobile Banking and look through your debit/credit card payment history to see your spending habits.
Hopefully, your income is larger than how much you are spending each month, but it’s quite likely they are very close to each other. You might find you only have a few dollars left over each month, not enough to really make a dent in your savings goal.
If you’re not sure how to build a budget, Pioneer members get free access to GreenPath, a financial counseling service. Their trained counselors can help you build out a budget and assist with growing your savings.
Be Frugal and Keep Costs Low
A penny saved is a penny earned, but we want to save more than just pennies in this economy. Now that you have a budget, it’s time to ask yourself the hard questions: What do I not need to survive? What costs can be cut what can be put into my savings?
The more frugal you can be, the quicker you can grow your savings. Cut out unnecessary purchases, like eating out, getting drinks at the bar, or buying clothes you don’t need for a specific purpose. Another way to be frugal is buying cheaper alternatives when you shop for things you do need. Buying the store brand cereal versus the name brand might only save you a dollar, but if you consistently do it while grocery shopping, you might end up saving ten dollars per visit that you can put into your savings.
You can also get creative and rely on others for being frugal. Rather than going out to eat with friends, host a potluck at your home. Share streaming services with roommates or friends rather than getting your own. Even try ride sharing when you need to get something in town or have to go to work. Every dollar you save can go into your savings.
Earn Extra Money to Put Into Your Savings
We live in a time of gigs, side jobs, second jobs, and people turning their hobbies into extra cash. Many need this extra cash to simply survive, but if you are looking to grow your savings, getting extra sources of money can help!
Driving for an evening of DoorDash, picking up a shift at a local store, or selling some handmade crafts online are all good ways to earn extra money. Just be sure that it’s actually worth your time and resources spent. If you find yourself only earning $30 bucks driving around town for two hours and end up spending $20 on gas, is the $10 profit worth the two hours?
There might also be a need to invest some money before you can start earning extra. If you want to start selling 3D printed decorations, you’ll need to invest in a 3D printer (or maybe an extra or better one) to get the business started. Again, weigh the potential profits off of the cost is important.
Eliminate or Reduce Your Debt
Debt is a heavy weight on your shoulders and can be a major barrier to saving money. Whether it’s student loans, a car payment, or overdue credit cards, debt makes the goal of saving money feel impossible.
Try and get rid of as much debt as possible, as quickly as possible. Take the first two pieces of advice (being frugal and earning extra money), and instead of putting it into a savings account, throw it at your smallest debt. Once that debt is gone, take what you paid towards that debt plus your extra money and throw it at the next smallest debt. Rinse and repeat until you are debt free, or at least eliminated the ones you can reasonably get rid of currently.
Once the amount of debt is reduced, then you have more money available to put into your savings!
Earn Passive Income
A lot of money experts and advisors talk about getting passive income if you ever want to become wealthy. Passive income is money that comes your way regularly without you needing to do anything for it. Your job is not a form of passive income, but you know what is? Your savings account.
But, with how low nearly every savings account is on interest, it’s not a reliable source of passive income. Other forms of passive income some people have are: investments, rental properties, a retirement account, or even selling digital formats of something like art or a book. These are ways you can earn money without needing to do active work.
The issue with passive income is that it comes with an element of risk and some sort of up front investment. You could earn passive income by putting your money in the stock market, but you also risk losing that money. Similarly, you could invest your time in writing a book to sell online to gain passive income from sales, but risk nobody buying your book.
Pioneer does offer a form of passive income through Term Certificates. Basically, you sign up and put up a certain amount of money you can’t touch for a set length of time. You earn interest on that money, and at the end, have more money then you started. It can be slow going, but if you have a few hundred dollars you aren’t using in the near future, you can put it in a Term Certificate and let it grow for a year or two.
Where to Keep Your Savings
Skip the piggy bank, or the box under your bed, and put your savings in the right savings account. Depositing your money with a financial institution, like Pioneer, keeps your money safe and insured. If you kept your life savings at home and it burned down, you have nothing. But if you keep it at a financial institution and something happens, your money is insured and you’ll get it back.
As for picking the right savings account, find one with low or no monthly fees. If all the bank is doing is holding your money, it should not cost you nothing. Pioneer offers a variety of savings accounts, perfect for your situation, with no fees and only requiring an initial deposit.
Learn more about Pioneer's Savings Accounts