By SWSM Staff
Each year, National Savings Day is set aside in October to encourage financial strategies for preparing for the future by saving money. Today, many Americans face the steep challenges of balancing elevated living costs and monthly bills with saving for major milestones—whether that is a down payment on a home, an emergency safety net, or a child’s college fund. My parents always used to remind me how important it was to have a “rainy day fund,” which I did not understand at the time, but fully understand now. Unfortunately, most people don’t have any money tucked away for an emergency. Let’s explore some simple ways to start building your savings quickly and give yourself some margin in life.
How Much to Save
To begin good saving habits, you must take a hard look at your monthly budget. One very tangible way is to evaluate how much you are spending on subscriptions and monthly bills. There is always going to be a company out there that will provide you with similar services or coverage for a lower price. I recommend that people evaluate their monthly bills and the companies on an annual basis. When creating a budget to incorporate savings goals, it is suggested to consider the “50/30/20” method:
- 50% of your take-home for Needs (housing, groceries, utilities)
- 30% for Wants (dining out, entertainment, hobbies)
- 20% directly for Savings and debt repayment, with a routine monthly habit of automatically setting aside a healthy portion of your income at the beginning, before you spend it.
The most effective way to hit your 20% savings goal is to remove human error and temptation entirely. Set up an automatic transfer through your banking app to move a portion of your paycheck into your high-yield account the day you get paid. By paying yourself first, saving becomes an effortless, invisible monthly habit rather than an afterthought.
Each person needs to evaluate their savings goals and season of life. For those who are single, a smaller savings account may suffice, but those who are married, own a home, and have children may need a higher amount in savings. One article suggests a personalized savings approach that considers what you own, owe, and spend, as well as your goals, concerns, and preferences. The article goes on to explain that continuing this type of savings plan throughout all seasons of life is crucial to continuing to chart the course and stay on track. Ramsey Solutions suggests that once you get out of debt, you should build up a 3–6-month emergency fund to provide a buffer for those inevitable emergencies.
Where to Place Your Savings
Where you keep your savings matters as much as how much you save. Leaving your hard-earned money in a traditional brick-and-mortar bank account means missing out on significant growth, as legacy institutions still offer national average yields below 0.50% APY.
With the Federal Reserve’s benchmark interest rate sitting at a strong 3.75% to 4.00%, you should put your money to work in a vehicle that fights inflation:
- High-Yield Savings Accounts (HYSAs): Leading online HYSAs are yielding up to 3.85% to 4.25% APY, providing an exceptional, risk-free return for your emergency cash.
- Money Market Accounts (MMAs): If you need flexible access to your funds, top-tier online MMAs pay between 3.50% and 4.05% APY and offer the added convenience of check-writing privileges or a debit card.
Many high-yield savings accounts offer strong returns, and one of the best parts of using a high-yield savings account instead of investing is that you can access your money quickly while still earning a higher interest rate. Another viable option is to invest in a money market account. Money market accounts offer more flexibility than a standard savings account, since you can write checks and make withdrawals, whereas savings accounts are less accessible, which may make it harder to actually save the money.
No matter where you save your money or how much you save, the goal is to start saving a little at a time. You will be grateful that you have some money socked away for those unexpected car repairs, HVAC unit replacements, and medical bills without having to go into debt. From my experience, an emergency savings cushion turns an emergency into an annoyance or inconvenience, and it’s much easier to recover mentally from the frustration of the expense than to recover financially.
