Saving is Interesting

By shuttling some of your money off into a savings account, you do more than just set it aside for later. You grow it. The interest on savings accounts may be fairly low, just a few percentage points, but there really is something great about finding you’ve got more money than you did before, without your having to do any more work for it. For instance, if you put your $7,200 emergency fund in a savings account earning 3% interest compounded monthly, after a year you’ll have $219 more than you did when you started. After five years, you’ll have $1,164 more.

Pay yourself first

The most surefire way to save money is to make it your first priority as soon as your paycheck comes in. This is called “paying yourself first” — treating your savings as if they were the most important bill you have to pay. Otherwise, your impulse will probably be to pay the other bills first, then buy what you need, and save whatever’s left at the end of the month. And if you’re like most people, what’s left won’t be much.

By saving the same amount each month before you even spend a dime, chances are you probably won’t even miss the money. If your job offers direct deposit, which means they put the money directly into your bank account on payday, you might be able to ask your employer to deposit part of your pay into your savings account, so you never even see it in your checking account — and you’re not tempted to spend it.