A Intro to Saving Money the Right Way

Saving is essential

Saving money is a necessity! If you don’t save up, you won’t have control of your financial life. You will end up living “paycheck-to-paycheck” like many adults, where you wait for payday just so you can pay bills and barely squeeze by for another two weeks.

That’s no way to live!

A much better strategy is to learn how to save. When you save money consistently, you can:

• Plan to achieve big goals, like going to college
• Cover emergencies and unexpected expenses that come up
• Make big purchases easier, like buying a car

The money you save needs its own place

When you save money, you want to put it somewhere besides your regular spending account. That way, you don’t end up spending the money you want to save up.

The easiest place to save your money is in a savings account. This is an account where you can set aside the money you save.

How savings accounts work

A savings account does more than just give you a convenient place to set aside money. It will also help your money grow.

That’s because savings accounts have interest rates that work in your favor. Annual percentage yield (APY) is a small percentage that gets applied to the balance on your account.

It’s not a big percentage. Most savings account save an APY of only 0.01%. So, if you have $1,000 saved in your account, you’d only earn about 10 cents per year.

You’ll learn about better tools for saving later in this lesson. But even small growth with a basic savings account is better than no growth at all in a regular bank account!

How to save money step-by-step

1. First, you will want to set a budget.
   1. This will help you save money because you will know where your money is going.
   2. So, if you haven’t taken the Budgeting lesson yet, you may want to take it after you finish this lesson.
2. Anytime you get money, you want to put a portion of it into savings.
   1. This includes money from paychecks if you have a part-time job, gifts, or money you earn for chores.
3. The money you want to save gets put into your savings account.
   1. The longer you leave the money there and the more money you have in the account, the more interest it will earn.

Smart Money Tip: Put money directly into savings

When you start to earn money regularly, it’s a good idea to start putting money directly into savings. There are two ways to do this:

1. If you earn a paycheck from a job, you can ask your company to split the paycheck.
   1. Part of the money goes into your savings account.
   2. The rest goes into your spending account.
2. You can set up a recurring transfer from your main bank account to your savings account.
   1. You choose a day of the month and the amount you want to transfer.
   2. Every month on that day, the amount you set gets moved to your savings account.

These two options make saving money automatic. That way, you don’t even need to think about saving money. It just happens!