7 Tips to Grow Your Savings

Understand your finances

The first step to consistent saving is understanding your personal finances. Knowing how much you earn and how much you spend can help you determine how much to save.

Let’s start with your monthly income after taxes. If it’s a bit different each month, take the average of 6-12 months.

Next, create a list of all your expenses, such as:

• Mortgage or rent payments
• All loan payments, including vehicle, student and personal loans
• Electric bill and other utility bills
• Credit card payments — more than the minimum if possible
• Average grocery store receipts
• Fuel and transportation costs

There’s a good chance that you spend cash in other categories, so use the list above as a starting point.

Track your finances for a few months by recording all your expenses to get a better picture of your spending habits. Finally, subtract your income from your expenses to see what you might be able to save each month.

For example, if you make $3,500 a month and have $2,500 in bills and necessary expenses, you have $1,000 in disposable income. You could choose to save at the average rate of 3.5% and save $35 per month. Or, you could choose more wisely and save 50% or $500 a month.

Define your savings goals

While everyone might agree it’s nice to have more cash on hand, it’s important to know why you personally want to save. Tying a savings goal to a personal goal can keep you emotionally invested and focused.

Here are some hypothetical savings goals and how they might help someone stay focused.

Create a budget

Once you understand your current financial status and have an emotional connection to why you should save, you can work on creating a budget.

Budgets can feel overwhelming, so start with short-term goals and work your way up to long-term goals. You can work with pen and paper, an Excel spreadsheet or a budgeting app.

Budgeting apps offer many benefits, including:

• Doing the math for you: You can enter your income and expenses and see immediately what you have left and how much you might save using a savings calculator.
• Automating tedious functions: Apps can categorize expenses, capture data directly from your bank account or credit card statements and remind you about budget items automatically.
• Collaborating budgets: An app might make it easier to collaborate on a budget with your spouse or partner.

Manage your debt

Americans pay a massive $120 billion in credit card fees and interest alone, according to the Consumer Finance Protection Bureau.

Given that, there’s a good chance that debt is a major line item in your personal budget. If you add up your loan, credit card and other debt payments, you may be surprised to see that they add up to hundreds or even thousands of dollars each month.

Learning to manage your debt can help you reduce this budget item, so you have extra cash for your savings.

These are some proactive ways to manage your debt to support current or future savings:

Open a savings account

When you find money in your budget to save, don’t just keep it in your checking account.

It’s too easy to lump that money in with disposable income you’re allowed to spend, and you might find at the end of each month you didn’t save much after all.

Instead, open a savings account and keep your saved money separate. A high-yield savings account will earn you more in interest, helping your money grow slightly. This type of savings account may require a minimum deposit and balance, so it works best if you can keep a few thousand or more in the account at all times.

Automating your savings is another good way to ensure you put money aside regularly. Many employers let you split your direct deposit, so you can have a portion go straight to your savings account. You can also use automatic transfers to move a certain amount from your checking to your savings on payday or any other time that might work well for you.

High-yield savings accounts

Here is a list of banks offering high-yield savings accounts:

• Capital One - 4.25% APY
• American Express - 4.30% APY
• Ally- 4.25% APY
• Marcus by Goldman Sachs - 4.40% APY
• Synchrony - 4.75% APY
• Discover - 4.25% APY
• SoFi - 4.60% APY
• UFB Direct - 5.25% APY
• Western Alliance Bank - 5.24% APY
• CIT Bank - 5.05% APY
• Quontic Bank - 4.50% APY

While there aren’t any banks currently offering a 7% interest rate on savings accounts, if you are looking for higher interest rates, you can find more information in our guide 7% interest savings accounts.

Reduce your spending

If you do the math for your budget and realize that you aren’t able to save as much as you’d like, you may need to cut back on spending even more to save money.

While it does take a bit of willpower, most people can find ways to reduce spending in their everyday budgets.

Some tips for reducing your spending include:

• Reducing your grocery bills
• Reducing your energy consumption
• Cutting or downgrading memberships and subscriptions
• Switching to a better deal when possible
• Reviewing your lifestyle habits

We’ll dive more into each of these ideas below.

Reduce your grocery bills

According to the Economic Research Service, Americans spent an average of 10% of their disposable income on food, with around half of that amount split between groceries and eating out in 2021. That’s a big part of anyone’s budget, and groceries are a good place to start when you want to spend less.

Consider these tips for cutting down on your grocery bill.

• Create meal plans and grocery lists that go along with them. Only buy those items when you shop, as it’s often impulse buys that bulk up your spending.
• Shop sales items and use coupons when possible. Stack coupons on sales items for the biggest savings.
• Buy nonperishable items you use in bulk. You can shop at warehouse stores such as Sam’s Club or Costco to get better deals or order online. If you order items online, look for free shipping options, so you don’t inadvertently pay more once the shopping cart is totaled.
• Choose store-brand or generic items over pricier name brands. Often, the only difference between them is the marketing on the box.
• If you have a credit card with grocery-specific rewards, use it to pay for groceries. This will help to maximize cash-back benefits. Just remember to pay off the statement, so you don’t end up with more interest expenses than savings.

Reduce your energy consumption

Cut down on utility expenses by minimizing energy consumption when possible.

Installing energy-efficient appliances can save you money in the long run, but if you don’t have the budget for those big-ticket items, you still have some options.

Some simple things you can do include turning off lights when you leave rooms and taking shorter showers to cut down on your water bill. You can also make smarter use of appliances by running the washer or dishwasher only when you have a full load.

Cut or downgrade memberships and subscriptions

Look at your recurring monthly spend and decide if these subscriptions and memberships are really necessary. For example, do you make the most of your gym membership or can you get a good workout done at home?

Streaming services, app subscriptions and other small monthly payments can add up to hundreds of dollars. Many people don’t even realize what subscriptions they’re still paying for.

An app, such as Rocket Money, is an easy way to discover subscription services you’re paying for and cancel the ones you don’t want anymore.

Switch to a better deal

For each item in your budget, consider whether you are getting the best deal currently.

Can you save money by switching insurance, internet or phone providers? Is there an option to bundle services for a deal? If the interest rate on your mortgage is high and you’ve improved your credit or earnings situation over time, can you refinance and get a better rate and lower monthly payment?

Take this thought process into day-to-day spending too. For example, always check for promo codes when shopping online and don’t assume the deal you’re looking at is the best one. Research prices at other stores or vendors and ask your preferred store if they price match.

Lifestyle habits

Even one simple habit change can make a drastic difference in how much you spend.

Here are a few more options for reducing spending through lifestyle changes:

• Curb impulse buying: Don’t buy things that aren’t in your budget. If you didn’t need them when you made your budget, ask yourself if you really need them now.
• Use public transport: When possible, travel via bus and metro to avoid all the spending that comes with a vehicle, such as monthly payments, insurance and fuel.
• Stop smoking: Try to get rid of habits that are not good for your health, such as smoking, vaping or drinking.
• Attend free events: Check local news sites, libraries and museums for free events. Attend those for entertainment instead of paying for outings.
• Eating out: Try to limit how often you eat at restaurants. Beyond potentially expensive meals, you’ll also save money by not purchasing drinks and by avoiding transportation fees to the restaurant itself. Better yet, meal prep at home using less expensive raw ingredients can help you save time and money.

Increase your income

If you reduce spending and still don’t have enough money left every month to save, it might be time to consider how you can increase your income.

For example, if a married couple needs more money and only one of them is currently working, they might decide that both of them should have jobs.

Some ways to increase income for an individual or an entire household include:

• Get a higher-paying job: Consider whether you can change jobs to make more. You may have to develop skills or increase your education to do so.
• Get a second job: Add a part-time job to the mix or have someone else in your household get a job.
• Start a side hustle: Join the gig economy to make money fast by delivering food or groceries or engaging in freelance writing or design services.
• Rent out your space: Convert your basement or guestroom into an Airbnb listing.
• Sell some stuff: Create items to sell on sites like Etsy or shop thrift stores for treasures you can sell for a profit online.

Invest your money

Once you find a way to save money, put it to work by investing it.

An easy way to invest is in a high-yield savings account, which lets you earn more in interest than regular savings accounts. You could also invest in mutual funds or put money into an IRA for retirement.