10 Secret Savings Rules They Don’t Teach You in School
Everyone grows up listening to the same finance advice: work hard and put some money aside for a rainy day.
Saving money seems like a no-brainer, but how do you actually make it a habit? And is there some guidebook the wealthy follow when it comes to saving? According to experts, there are some secret savings rules you likely didn’t learn in school.
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“Save, then spend, and not the other way around,” said Jonathan Feniak, general counsel at LLC Attorney. “Instead of saving what’s left after spending, it’s vital to allocate a portion of your income to savings first. This is a practice I’ve incorporated from my days as a financial advisor at Wells Fargo.”
Below are more expert-backed savings tips.
Open a Savings Account as Soon as Possible
“It’s best to start saving and open up a savings account as early as you can,” said Joe Chappius, financial planning expert at Tax Climate. “The earlier you start, the more time your money has to grow and compound through the bank’s interest.”
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Consider a Side Hustle
“In a world where income streams can be unpredictable, having a side hustle can be a game changer,” said Feniak. “As the co-founder of Colorado Alternative Investment Group, I can attest these additional investments or ventures offer an additional safety net.”
Understand the Impact of Fees on Your Savings
“Most aren’t aware of how bank, investment and retirement account fees can slowly chip away at their savings,” said Feniak. “By carefully choosing low-fee or no-fee options, we can maximize our savings over time, a lesson I have learned about managing trusts and business finances in my career.”
Automate Your Savings
According to Erika Kullberg, attorney, personal finance expert and founder of Erika.com, automated banking is a game-changer for so many people, especially those who struggle to hit their savings goals.
“In school, you’ll learn all about budgeting and how to theoretically stow some cash away, but rarely are we taught exactly how to ensure we make that saving [goal] each month,” she said.
Today, she said you can achieve that by maximizing the potential of direct deposit — set up automatic savings when your paycheck comes in each month.
Map Out Larger Purchases in Advance
“When it comes to budgeting and saving, we’re also taught about the basics of saving up for a big purchase over months or even years,” said Kullberg. “But we should take that a step further and actually research when the item we’re planning to purchase is typically on sale.”
“If you can map out those larger purchases in relation to sale seasons, you can reduce that expense and save even more,” she explained.
Learn About Taxes — And How To Avoid Them
“Taxation is important when it comes to your savings, so it’s important to understand how it works,” said David Bakke, financial expert at Dollar Sanity.
He said that, more importantly, you should learn how to avoid paying them in order to save more. “A quick example is saving money in an employer-based 401(k) plan, where your money grows tax-free.”
Prioritize Insurance
“Never ever ever go without health insurance,” said Bakke. “If you do and something happens, you could be done financially for your life and have no chance of saving.”
“It’s pretty much the same with life insurance, if you want to protect that ability to save for your family members,” he added.
He said to approach all other forms of insurance — for the most part — cautiously, as some are necessary and some are not.
Master Your Credit Score
“Your credit score is your best friend when it comes to saving, because when it’s high, you’ll have a lot more money to save,” said Bakke. “Pay your bills on time, never carry balances and check your credit report regularly for errors, and fix them when they come up. Those are just a few quick pointers.”
Understand the Difference Between Saving and Investing
“First off, you need to understand that saving and investing are two different things,” said Chappius. “Saving is like putting money aside for later, while investing means putting your money into liquefiable things to make them grow over time.”
He said many people are tempted to directly invest and not prioritize their savings, because they think their money can grow through investments.
Keep an Eye On Impulse Buys
“You need to know that splurging shouldn’t be heavily avoided,” said Chappius. “It’s totally fine to treat yourself now and then.”
However, he said, you should be careful with impulse purchases. “Make sure you’re not constantly blowing all your money on things you don’t really need, and put it into your savings instead.”
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