When you can barely manage to pay the bills, trying to build up a savings account may seem impossible. There’s always an emergency, or some unplanned expense, a forgotten bill or some other reason why we can’t seem to put money into a savings account.
Without a savings account however, a person can never really get ahead. For a low income family trying to make ends meet, not having a savings account may be costing you money.
You see, every time you have to charge an expense, set up a payment plan, buy sometime “on time”, or get a payday advance, you are having to pay fees and interest which cuts into your income. With interest rates at 20% and higher, this means that you are losing at least one fifth of your money just to interest and fees.
To get ahead of the game, sinking money into some kind of saving account will let you cash flow your expenses instead of financing them. Paying cash puts money into your pocket instead of the pockets of banks, finance companies, and credit card companies. Still think you can’t afford to build up a savings account? Even with a very low income, it’s totally possible to build up some savings. Let me show you how easy it can be.
1. Automatic withdrawal. If your paycheck is on direct deposit, set up an automatic savings withdrawal program at your bank. This super easy way to save money takes a percentage out of your check before you know it’s even missing. For low income families, start low with 1% which is $12 a month on a $1200 a month take home income.
2. Put all unexpected cash into your savings account. Even when I was a low income single mom, there always seem to be little bits of cash showing up in my mailbox. These little windfalls were things like rebates, refunds, insurance adjustments, jury pay, and other little odds and ends which quickly added up to some serious cash. One painless way to save money is to deposit all “free money” in your savings account. You’ll never miss it.
3. Save coins. Let’s face it, most of us seem to live out of the coin jar when our income isn’t so hot. But, getting in the habit of saving even just the pennies and nickels can amount to a few extra bucks each month that can also go into a savings account. Don’t use the coin machines at the grocery store to roll them up, that’ll cost you 8% or higher. Instead, pick up some free penny and nickel rolls from the bank and roll ‘˜em yourself.
4. Be creative about earning extra cash. Now more than ever, there’s all types of opportunities for making a little extra cash to put in a savings fund. Yard sales, house sitting, baby sitting, picking up cans for recycling, eBay, shoveling walks or raking leaves, blogging, and other on-line venues all create opportunities for picking up extra cash that can go into a savings account.
5. Walk with an eye glued to the ground. OK, so this sounds pathetic, but there was a time when I was so hard up for cash as a single mom that I’d walk around parking lots looking for lost money. I’d average anywhere from 25 cents to a buck a day which meant easily $10 or more a month to put into savings. While I don’t recommend wasting all day walking through parking lots, it’s not a bad move to keep an eye out for lost change when headed to the grocery store.
6. Give up something. No matter how tight your finances are, there is always something that can be squeezed even tighter. Tips for freeing up cash for savings include things like turning back the heat 3 degrees, giving up soda pop or potato chips, canceling cable, brown bagging it instead of buying fast food, having soup for dinner one night a week, the list really is endless. Something as simple as giving up one soda pop a week can net you $5 a month in savings.
When the name of the game is financial independence, the only way a low income family can ever get ahead is by disciplining themselves to trim costs and save, save, save. These six little tips will help get you started, the rest is really up to you.
For more related content by C. Jeanne Heida, see:
How to use a coin jar to budget and save money
How to build up a savings account in tough times