3 Ways To Make Saving Money A Habit (2024)

The term “savings” seems to have an inherently positive connotation. We all may aspire to be “good” at saving money. But we’re rarely told in specific, practical terms how to actually reach that point.

Should we keep our money in a bank savings account? Should we invest at least some of that savings? Should our approach look different if we’re saving for a down payment, compared to a vacation?

Our parents, teachers, friends and favorite media personalities may all preach the savings gospel. At the end of the day, though, we’re left wondering how to get from where we are to that elusive savings goal.

For many people, life—at some unexpected point—has a way of making savings feel especially urgent. Perhaps your car breaks down, you’re faced with a serious medical issue or you’re living through a pandemic-driven recession. After you’ve endured such a financial emergency, you may find yourself wanting to avoid a similar situation in the future. With so many potential savings strategiesand different demands on your funds, you may wonder how you’ll ever make real progress.

The Best Strategies for Saving Money Consistently

You may have heard about “automating” your savings. While each financial institution’s online platform may look different, the concept is simple: to take the burden of saving off your shoulders.

To put this concept into practice, think through how much you can afford to save each month. Then log in to your bank account, instruct your bank to deposit this amount in a separate account each month and applaud yourself for creating the foundation for achieving such an important goal.

This is an easy, overlooked tactic. It’s also never too early to begin to build the savings habit. Consider teaching your childrenabout the value of starting to save at a young age and keeping that habit for decades to come.

The path to real progress doesn’t end with establishing the savings habit, though. You also need to figure out how to increase your savings incrementally over time. In some cases, you’ll need to replenish funds that you used in an emergency. With other savings goals, such as a down payment, you’ll likely need to increase your savings contributions over time to reach your target dollar amount.

As with automation, you’re most likely to succeed at this task by making it as painless as possible. Developing the habit of saving is a frequent topic among financial advisors, especially those who work with Millennial clients. Here are three actions you can take to increase your savings contributions.

1. Rely on Annual Events on Your Calendar

Everyone views milestones in a given year differently, so you can adapt this idea as you see fit for your life. For many people, the arrival of the new year or the beginning of the benefits open enrollment period at work offers the best reminder to boost your savings.

In the first few days in January, when you’re feeling motivated and optimistic about the weeks ahead, try to increase your savings contribution by 1%. Similarly,if you contribute to a retirement savings plan at work, when you need to log in to your workplace benefits account in the fall, view that task as another opportunity to improve upon your previous contribution amount.

2. Redirect Funds Previously Required for Other Expenses

As our lives change, the major expenses that we previously planned around also can change. In some cases, buying a homemay reduce the monthly amount that you paid in rent. For parents with young kids, the start of public school may reduce or eliminate large amounts that they previously spent on daycare.

No matter the circ*mstances, the end of these payments presents a special savings opportunity. Don’t just allow this money to go unaccounted for in your budget. Instead, shift some or all of this payment to a savings account. In doing so, you’re not feeling any new financial pain to move closer to your savings goal.

3. Have a Plan in Place for Large, One-Time Cash Inflows

Some people receive an annual bonus as part of their work. Others may receive a small inheritance, or even just a nice birthday gift from a family member. Often, this money is simply left to languish in a checking account, whittled away over time by inflation or, in some cases, higher-than-usual credit card balances.

In many cases, this is “new” money on which the recipients haven’t previously relied. As a result, transferring a significant portion of this lump-sum amount to a savings account doesn’t feel like a loss or a stretch. In addition to giving you more time to decide how to manage a financial windfall, it’s one of the best ways to take a huge leap toward the goal you have in mind.

Saving Money to Prevent ‘Lifestyle Creep’

For many people, a raise or bonus is an all-too-infrequent occurrence. This compensation represents an accomplishment that you should celebrate—in part by spending some of that money. But underneath this new money also lurks a hidden risk.

While a raise or bonus may increase your short-term savings, the money also may change your lifestyle. This dynamic, called “lifestyle creep,” isn’t inherently problematic. If you’re thoughtful and intentional when you start spending more money, an upward lifestyle shift can truly improve your life.

But a significant increase in your spending also means you need to save more money in the future to maintain that lifestyle. In fact, research—most recently by Of Dollars and Dataauthor Nick Maggiulli—suggests that when you save less than 50% of this new money, you’re forced to start pushing back your retirement date.

This reality points out one of the unheralded benefits of saving: Even when you don’t have a specific savings goal, the act of saving itself builds financial stability over an extended period of time.

Balancing Different Types of Rates

The inverse of lifestyle creep is a gradually increasing savings rate. Since we often tie savings goals to specific expenses, we focus too much on dollar amounts that we have saved. But the key to many daunting, long-term savings goals, including retirement, lies in consistently increasing the percentage of income you save each year.

When we talk or read about money, we hear much more about a different type of rate—the rate of return. As a result, we devote our time and energy to obsessing over which single account can generate the most growth for us. This leads some people to open new bank accounts regularly, while others buy and sell stocks far more often than they should.

Rates of return frequently change. And they change based on factors—such as economic conditions and government policy—that are far outside of our control. What we can control is how we align our desire for some return with our goals and their respective timing. Long-term funds may warrant being placed in a more aggressive, higher-return account, but the same does not hold true for a shorter-term goal.

We also can control how much of our income we save. Increasing that rate consistently over time is far more effective—and far less stressful—than trying to chase rates of return or save large amounts all at once.

Saving Money During a Pandemic

The pandemic has prompted almost all of us to focus on our savings habits with renewed energy. And rightly so—any extra cash we can access in the months ahead provides a valuable buffer during turbulent times.

But it’s also critical to acknowledge that many people don’t have the space in their monthly budgets right now to save much.

During a recession and global pandemic certainly is not the time to feel badly about your savings habits or to judge others who struggle to save. Instead, just start where you are and develop the habit. Save whatever small amounts you can, in a way that you can sustain and grow over the long term.