My tip: have two savings accounts.
One of the first things I did when I got my first Big Girl JobTM was open a high-yield savings account. This involved applying for an online savings account with Ally (although there are a lot of online banks nowadays that offer great High Yield Savings account options), essentially creating a separate, secondary savings account from the one I’d always had with my credit union.
Why create a second savings account? Well, because you’re more likely to actually save if you do. I think you know what I’m talking about. When you transfer some money from your “savings” to your checking account, because your checking is “getting a little low” or “this is an emergency” or “just this once, I have to pay for X,Y,Z.” I’m not saying that there aren’t perfectly reasonable occasions people have to dip into savings (unexpected car troubles, healthcare surprises, a fun little parking fine on the day you ran late for something and parked where you weren’t supposed to). What I’m saying is that creating that extra barrier (that second savings account not within the bank you currently use) will make all the difference in slowly but surely building your savings.
Why? Because it’s inconvenient to transfer money from an outside bank into the bank you most currently use. You have to go and submit a transfer, and wait for the transfer to go through. Also, “out of sight, out of mind” definitely applies here – when you don’t see your “savings” balance right next to your checking account, you’ll be less likely to touch your actual savings. Sure, keep a buffer balance in your main bank for emergencies and whenever your checking drops low, but start putting some of your paycheck in a “no-touch” High Yield Savings account.
First, that means you need to be realistic about how much you can actually save each month. You might be excited to start a new budget and say you’re going to start putting 20% of every paycheck into your high yield savings account. However, if you’re not used to saving that much and you’re not used to the reduced cash flow, you might end up having to transfer back your “no-touch” savings anyways to cover a bill or rent. Start small and steady. Heck, if that means only putting in $5 into your “no touch” savings account at a time, then do it! Better to start somewhere than to keep waiting for the perfect time.
Second, pick the right high yield savings account for you. I suggest picking an online one outside of your traditional bank. Making it an obstacle for you to touch your savings will make you less likely to do so. Additionally, a high yield savings account, of which there are many , makes sure that your money grows faster than it would in a traditional savings account. Make the money work for you!
There are lots of great options, but the first step is simply getting started. It’s easier than you think to open an online bank account, it took me 5 minutes when I did it. So go take a look at your bank statements, choose an amount and a bank that works for you, and start your new, secondary savings account!