Save now, for later!

If 2020 taught us anything, it’s that an emergency fund is an absolutely essential piece of financial resiliency. The Federal Reserve Bank of St. Louis recently reported that the Personal Savings Rate (the amount left over after expenses, like monthly bills, housing, food, and taxes*) shot up in early April 2020 to almost 35%, but quickly nosedived and by November had decreased to 13%. People who could saved their Economic Impact Payment and for some spending on things like eating out, hair, and even transportation came to a screeching halt early in the pandemic.

Unfortunately, not everyone was able to save at 2020 rates or even at 2019 rates. Many had to deplete any savings they had, waiting for unemployment to kick in or to make up a shortfall due to a reduction in income. Others had little or no savings to fall back on.

How do we build back or build up savings?

Make it automatic. Set up automatic recurring transfers with your bank or credit union on payday or have your employer split your electronically deposited paycheck between your checking and savings account, some employers’ payroll processing companies allow you to split your check into as many as 5 different accounts. It is ok to start small, the idea is to get yourself into the savings habit. If you can’t do it right now, make it a goal to start a savings habit. For long term savings, like retirement, if your employer offers an Employee Savings Plan, take advantage of it, especially if your employer matches a portion of your contribution.

Another strategy to boost or start your savings is to give each dollar a job. For example, when you receive a lump sum (tax refund, gift, bonus), split it 3 ways: 1/3 towards paying off or down past debt, 1/3 towards current expenses, and 1/3 for the future (this includes setting up an emergency fund, retirement, etc.).

Make savings fun, so it goes from a chore to a game. And get the whole family involved! You can search the web for ideas or start with these:

  • 1. 52 — week savings challenge — save $1 for the first week, $2 the second week, $3 the third week, and by the time you socked away $52 for the last week, you will have saved $1,378. If your financial institution charges you a fee for a savings account, switch to another financial institution!
  • 2. Round it up — when you make a purchase, round it up to the next dollar, and save the difference. There are even debit cards that do this automatically for you!
  • 3. 10% challenge — save 10% of your monthly gross earnings (earnings before any deductions). By the end of one year, you will have over one month’s salary in savings. 4. Take the Savings Pledge ( ) during America Saves Week (February 22–26). When you take the pledge, you set a saving goal and deadline. You can also opt in to have reoccurring text message savings tips and advice. It is an easy way to stay motivated and test out new savings tips.

However you decide to do it, whether it is a now or a future goal, a savings habit is a good habit to have. If you are not sure how to get started, Clarifi counselors can help you set goals, evaluate spending, and start saving.