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When it comes to saving money, this year may look a little different from years past. The savings rate is lower than its peak of about 34% in April 2020, but Americans are still saving more than they did before the pandemic. This is according to the U.S. Bureau of Economic Analysis, which defines savings as the amount left over after spending money and paying taxes.
Unemployment is still elevated, however, and those who have lost income may be finding it more difficult to save. Either way, it’s important to have a savings plan.
Whether you are flush with cash, not sure how to save money or somewhere in between, here are the actions you can take now to maximize your savings:
Unsure how to save
If you’ve found it difficult to save money lately, try these tips to strengthen your bottom line:
Cancel high bank fees and other unnecessary expenses. “Businesses conduct financial audits for their expenses. Why not conduct a personal audit for yourself to cut spending?” says Michael Foguth, founder of the financial advisory firm Foguth Financial Group in Brighton, Michigan.
If you have a bank account that charges a monthly fee of $5, that adds up to $60 every year. Consider switching to a free account. There are options at many top online banks.
Another example: Say you signed up for a streaming service at the start of the pandemic because you were mostly at home. But now, if you’re not watching TV as much, you could cut the service to save money, Foguth says.
Weigh options to increase cash. Consider taking on part-time work — job growth is increasing and there has been pressure on employers to increase wages — or sell unused belongings to raise cash. For help with major expenses, such as rent and medical bills, reach out to community organizations. The government website usa.gov/help-with-bills is a good place to find resources. Even temporary cash boosts could help you unload debt and give you room to create a savings plan.
Saving a little at a time
Maybe you’re able to save occasionally but would like to save more. If you’re already putting the previous tips to use, try these action items:
Open a high-yield savings account. The average savings interest rate is a low 0.10% APY, but there are other accounts that pay many times more. With a high-rate savings account, your deposits earn more money while being safely parked in a federally backed bank account.
Set up auto transfers to savings. Move money from a checking account to savings before you get the chance to spend it — on each payday, for example. If you are able to transfer just $25 into savings every two weeks, you’d stash $650 by this time next year.
Bank bonus money. Decide now to save any extra money you receive, such as a cash birthday gift, tax refund or stimulus money that you don’t need immediately for expenses.
Already saving, ready to maximize
Already have a savings plan and looking for ways to make the most of your money? If you’re using the previous tips, here’s how to make your money work harder:
Reevaluate spending goals. You may have some of your savings earmarked for a big ticket item. But for some people, the pandemic redefined what was important to them. Before you cash out, consider whether your previous goals match your current needs.
Economic conditions may also come into play. Alissa Johns, a real estate investor and small-business owner in Valparaiso, Indiana, and her husband originally set aside money to buy a new home in early 2021. But she says when they saw how tight housing inventory was and how construction prices were rising in the area, they chose to stay put.
Instead of moving, “we decided to refinance our current home loan and vacant land loan for lower interest rates,” Johns says. She adds that doing so allowed them to “decrease our monthly expenses and be able to put more money towards saving.”
Maximize your emergency fund. Experts recommend having at least three to six months of savings set aside for emergencies. If you have some savings but haven’t hit that mark, keep plugging away until you reach your goal. If your emergency fund is fully funded, you could focus on long-term financial goals.
Check out rewards accounts. Consider getting more value out of your spending by using checking accounts and credit cards that offer perks or promotional offers. The best rewards checking accounts, for example, earn interest, offer cash back on spending and may even offer a one-time sign-up bonus.
Top savings strategies may look different for people in different financial situations, but the most important step for anyone is to take action. Regardless of where you start, act now and you can put yourself in a position to increase savings this year and beyond.