Financial Literacy Month is the perfect time to assess your savings and evaluate your level of financial preparedness. Start by asking yourself these three questions:
- Do you have a financial plan that includes savings and debt management goals?
Savers with a plan are twice as likely to save successfully. And you’ll feel more motivated to save money if you have a plan in place. You can start your financial plan by taking the America Saves pledge and making a commitment to save money. It’ll be much easier to save if you have a goal in mind to keep yourself motivated. That’s why we say set a goal and make plan!
You can put some of your savings towards reducing your debt! Begin by paying off your high-interest rate debt first, like credit card debt. The longer you wait to pay it down, the more money you’ll end up spending. One technique is to start by paying off your smallest balances first. Why? Getting rid of smaller debts will give you an extra motivational push to tackle your larger outstanding balances, and it will be fewer bills to remember each month.
- About six in 10 Americans do not have enough savings to cover a $500 to $1,000 unplanned expense, do you?
Only 41 percent of Americans have enough savings to cover an expensive emergency, according to a report by Bankrate. That’s why it’s important to have an emergency savings fund. If you make saving for a rainy day one of your top priorities, you’ll thank yourself later. When unexpected expenses occur (and they will occur), you’ll be financially prepared to deal with them.
- Do you save money automatically?
The easiest, most effective way to save is automatically. Set up direct deposit into your savings account using split deposit, so a portion of your paycheck can go into savings each time to you get paid. You’ll be surprised at how much money you can save when your contributions are consistent. This also helps to ensure that you don’t give up.
Putting money in your savings account might be easy now while you’re excited to get started, but it might get a little hard later on. When your savings are automatic, you don’t have to worry about losing your momentum.
If you don’t have access to direct deposit, you can ask your bank or credit union to make automatic deposits each month from your checking to your savings account.
You should also consider making your retirement savings automatic. If your employer offers a 401(k), take advantage and enroll, especially if they offer an employer match. Otherwise, you’re leaving money on the table. With a workplace savings plan, you’ll contribute a percentage of your paycheck into your retirement plan each time you get paid, and sometimes reduce the amount of taxes you owe, depending on the type of plan. If your employer matches your contributions, you can save double every month. It’s a win-win situation!