Steps for how to begin growing savings

Do you have accumulated debt, maybe from student loans, credit cards, car loans, or overspending? Are you savings money for the future?

Although a lot of people struggle with saving, it’s possible to gradually building small savings into large sums.

Here are some ways to help you begin to save or build up your savings, offered by the FDIC.

Save for specific goals

It helps to have a savings plan for future expenses such as education costs, a home or car purchase, starting a small business, or getting ready for retirement whether you’ll retire in a few years or several decades.

In addition, building up an emergency fund that will cover at least six months of living expenses to help get through challenges, such as a job loss, car repairs, or medical expenses not covered by insurance, is important.

Commit to saving money regularly

Any amount you can put in savings will help provide a cushion against future financial hard times or big purchases. Even if you don’t make a big salary or have a steady income, the combination of consistently adding to savings and the compounding of interest can bring dramatic results over time.

Aim to save a minimum percentage of your paycheck and through the years, try to increase the amount you put aside as you pay down other debts. Saving a set amount on an ongoing basis is known as “paying yourself first,” because you’re saving before you are tempted to spend. If you can’t afford to save a specific percent of your earnings, begin with any amount you can afford. When you find that you can manage your expenses while also saving, try to increase the amount you contribute to your savings at every opportunity.

Put your savings on autopilot

Make saving money quick and easy by having your employer direct-deposit part or all of your paycheck into a savings account. Your employer or financial institution may be able to set this up for you. As you pay off debt, switch to making those monthly “payments” to yourself.

Make use of tax-advantaged retirement accounts and matching funds

Look into your retirement savings options at work, which may come with matching contributions from your employer. It’s possible that allocating part of your paycheck to your retirement account won’t reduce your take-home pay significantly, especially when you consider what you may save in income taxes. In addition, the sooner you start saving money in a retirement account, the more you can take advantage of compound interest.

If you have contributed the maximum at work or if your employer doesn’t have a retirement savings program, consider establishing your own individual retirement account or IRA with a financial institution and make regular transfers into it. Remember that you can set up an automatic transfer from a checking account into a regular savings account or an IRA savings account or both.

Separating savings for certain purposes

Consider keeping emergency savings in a separate savings account instead of a checking account, so that you can better resist the urge to raid the funds for everyday expenses. Be sure to develop a plan to replenish any withdrawals from your emergency fund.

For large purchases that you hope to make years from now, consider certificates of deposit or U.S. savings bonds. These generally earn more interest than a basic savings account, because you agree to not spend the funds for a certain period of time.

For future college expenses, look into 529 plans, which provide an easy way to save for college expenses and may offer tax benefits.

For healthcare expenses, find out whether you are eligible for a health savings account, a tax-advantaged way for people enrolled in high-deductible health insurance plans to save for medical expenses.

Think about ways to cut your expenses

For your financial services, research lower-cost checking accounts at your bank, other banks, and credit unions. Some credit unions offer free checking for adults age 50 and older. In addition, look at your monthly expenses for everything from food to phones and think about ways to save.

If you are spending more than you earn, read the FDIC’s Consumer News article “Time to Take a New Look at Your Money Habits.”

Even if you have little savings for immediate needs, starting small can move you toward your savings goals. These valuable strategies can help you gradually build your savings into large sums.