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The Other Compounding

By Rich Beattie

  • PUBLISHED February 26
  • |

On average, Americans save about 5.5% of their money—a far cry from the 10-15% minimum that experts recommend. The unfortunate truth is that when it comes to squirreling money away, we may start with the best of intentions, but that cash can disappear before we realize it’s gone.
Here’s the good news: Making even modest contributions to your savings on a regular basis can have an outsized impact on your financial well-being.
One key to making those contributions is to set realistic goals. If you think you can save only a few dollars a month, then do that. And when setting goals, be specific. Instead of telling yourself that you’re saving for, say, a vacation or a down payment, define exactly how much you want to save; that will give you a concrete goal. And most importantly, be consistent. Stay focused on your goal, every day of every week. Here are some suggestions on how to take the first steps.  
Automate Your Savings
You probably have direct deposit for your paycheck. But have you considered using that same automatic transfer technology to benefit your savings? 

  • Split your paycheck. Your entire salary doesn’t have to go into the same account. In fact, you can set up most direct-deposit programs so part of it goes into a dedicated savings account. That way, you never even see the money before it gets saved—which reduces the temptation to spend it. And here’s a fun game: See how long you can wait to check the balance on your savings account. The longer you wait, the more pleasantly surprised you’ll be.
  • Set up a recurring transfer. If your employer won’t let you divvy up your direct deposits, then you can regularly divert your money into different accounts yourself. A recurring transfer from your checking account to a savings account is one way to make savings growth an automatic part of your monthly banking. Even if you have just a small amount moving to your savings account every two weeks, over the course of a year it’ll add up.

Capitalize on “Saving Moments”
Now that you’ve implemented an ongoing saving plan, it’s important to recognize other opportunities to save—from annual events to daily tasks. Try these out, even just for a couple of weeks; if you can make saving a habit, it’ll be that much easier—especially with your growing account balance to motivate you.

  • Plan daily savings. Set aside just $1 per day; at the end of the year you’ll have accumulated $365 in your bank account—and that’s before interest gives you a bump. Imagine what that number would be if you saved $2 a day, or $10. Only have spare change to set aside? Do it—it adds up.
  • Profit from windfalls. Any time money comes in unexpectedly—like a tax refund or a work bonus—make it an opportunity to save. Remember: You don’t need to set aside every dollar you receive (celebrating your windfall is part of the fun, after all), but commit to saving a certain percentage of the total (say, 30% or 50%) when one of these irregular events occurs, and it can really pay off.
  • Cut down on costs. Make this the year you take advantage of the many little ways you can spend less—and there are a lot. You may have heard the advice to make your own lunch and fill up your coffee mug before you leave the house. But take a look at where else your money goes, and consider alternatives. You may find that you can dial back your cable TV and streaming video costs, trim your gift spending, reduce your gym fees and shave your clothing or beauty budget.
  • Don’t leave money on the table. Take the time to ensure that you’re maximizing every employee perk that your job offers. Look into what percentage your employer matches on your 401(k)—then invest at least that much—and what discounts they may offer on cell phone bills or through discount programs at local stores. Don’t forget: Every dollar you don’t spend can be saved!

Remember, savings opportunities abound—once you start looking for them. So try some of these simple tricks, and watch your savings grow. 


Rich Beattie is a former executive digital editor of Travel + Leisure, and has written for outlets such as The New York Times, Popular Science, New York Magazine and SKI.

Ready to start saving? Consider a Synchrony Bank high yield savings account.

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