No one said saving was easy — at least no one at MyBankTracker — but it must be done. It doesn’t matter whether you’re saving money to purchase a house, for an emergency fund, or to take a vacation next summer — you should be saving no matter what.
That said, it’s important to save smartly. Protect yourself by avoiding these 6 dumb money savings mistakes:
1. NOT saving now
No matter what you’re saving for, it’s imperative that you start saving immediately. Like yesterday. Don’t make any more excuses. Just start saving. The longer you wait to save, the more regrets you will have down the road when it comes time to purchase a home or retire. Just think: How much money would you have earned today if you saved just 10 percent from your paycheck into, say, an IRA when you were in your 20s, earning compound interest on your investment? [Learn more: Got Your First Job? How to Start Saving for Retirement]
2. NOT saving enough
So you say you’re saving 10 percent of your income? Well, have you gotten a raise or increased your earnings in the last few years? The amount you save should keep pace with your income. Maybe you can only afford to save a few bucks each week as you enter the working world, but as you experience job growth, remember to revisit what you’re saving and increase the amount if you’re taking home more.
3. NOT saving in the right way
Are you saving money in a traditional savings account? Have you considered saving a portion of your income to a high-yield money market account or CDs? These investments can help you build your savings more quickly than a traditional savings account. Of course, be sure to check out the terms of these investments because they are generally more risky. But if you’re saving for something like paying to send your kid to college, these investments might be worth looking into to help your money grow.
4. NOT saving in a diverse way
Diversifying your investments will protect your money should the market tank. By spreading your investments around in a variety of stocks, bonds, and other securities you will lower the risk of losing your investments all at once. Sure, it’s not exactly the most exciting way to invest, but it is safer than putting all your eggs in one basket.
5. NOT saving it all
It might be tempting to dip into your various savings (or retirement) accounts when you need money. But think about how much money you’d have saved up had you left your savings intact. Don’t dip into your savings accounts unless it is an absolute emergency situation and you’ve exhausted all your other options. You’ll regret it otherwise.
6. NOT saving for a rainy day
You’ve been told several times to save money in an emergency fund, yet you still haven’t. What if you lost your job? What if your spouse passed away? Would you be OK financially? If you had saved a bit of your paycheck each month from when you first started working, you’d have quite the savings fund. The Great Recession proved that financial calamities can happen, so prepare your finances today for the unexpected turbulence you might experience in the future. It’s recommended that you save at least 3-6 months’ worth of living expenses in an emergency fund — and saving more is never a bad idea.