Remember your first piggy bank? Maybe it was an actual piggy, or maybe it was one of those “change” organizers that stacked and separated your coins. Maybe it was something modern that motivates your savings into different categories like the Money Savvy Pig. Whatever it was, the idea was simple: Keep dumping cash in and someday you’ll have a pile of it.
Anyone with a piggy bank, savings account or an IRA knows savings is probably a good thing. But let’s face it: It’s not that exciting. We save simply because we’re supposed to.
But why is this one aspect of our financial plan often so narrowly focused? In an age of diversity, a similar, targeted, active, involved effort to save in specific categories with specific goals not only makes saving more effective but more useful — with plenty of gratification built in. Turns out the Money Savvy Pig makers were on to something. Here are some categories you should consider as you diversify your savings.
Save it and forget it. Right off the top each month, the first bill you should pay is your obligation savings. Sign up at work for the retirements that are offered and/or put a payment into long-term steady growers that will provide for you much later in life, be they 401Ks, IRAs or mutual funds. Rip it off the top each month and forget you have it.
Save it and use it. Once the obligation is out of the way, your savings diversification can get to work. Start saving for things you want, like a new house or a vacation. Put specified money into each account, even if it’s all in one account but different line items on your ledger. For example, use all the round-up change for the new house, or pay yourself to stay in one night a month and put the money in the vacation fund. Put off buying a new car for one year but start making the payments to yourself.
Save it and grow it. Figure out what you can afford to lose each month and invest it in more aggressive savings that could bring high rewards. Invest it, risk it and have fun with it. Get engaged with online resources that will help you make your decisions like Online Trading Academy, Trading Markets or the mainstays like Etrade and Ameritrade. If money gets tight, spend less. If you have some extra, invest a bit more. Your interest and involvement will make it enjoyable as well as profitable.
Save it and rely on it. The biggest financial plan killer is adversity. When bad things happen like losing a job or facing an illness or a blown engine, we often have to rely on credit to survive, which delays the pain and hinders our ability to bounce back quickly. Most financial advisers recommend an emergency fund of three to six months of total expenditures. Once it’s in place, leave it until it’s needed and then use it with peace of mind.
Savings doesn’t have to be the drudgery of simply sliding cash into a place where we “can’t touch it” as the old saying goes. Instead put your fingerprints all over it to grow it, use it, forget it and rely on it, all of which will collectively become the foundation for your financial success. Even if the amounts are small at first, the practice will build over time.