6 strategies for those struggling to save

A recent survey found that nearly a quarter of Americans have no emergency savings. That means no safety net if an urgent situation arises, such as a car repair, job loss or medical procedures. No savings could also mean having to use a credit card and run up debt, or to pull from retirement accounts, losing precious compound interest, growth and potentially paying penalties for early withdrawals.

But all hope is not lost. There are a variety of approaches to help build a savings habit into your routine. “Saving isn’t about giving something up. It’s about building something greater for your future,” said Belinda Silva, consumer area manager at BOK Financial.

One of the first rules of saving is having a goal in mind and prioritizing putting money toward it. Also, don’t wait until after you’ve paid bills, gone shopping or out with friends. You’ll likely find there’s nothing left to save.

1. Pay yourself first through auto saving
One of the easiest and most highly recommended ways to save is to pay yourself first. Set up an automatic transfer of a portion of your paycheck into savings as soon as you get it. This is like hiding money before you see it or get a chance to spend it. Automations can be set up from your checking account into a savings account. Some employers allow you to set up a percentage of your paycheck to go into a savings account the same way you set up a portion to go into your retirement account.

2. Cash stuffing
With most financial transactions and accounts being digital, it’s easy to lose track of how much is going in and out. If it helps you to see and physically count your money, then cash stuffing might be for you. Pull out your monthly spending in cash and put allotted amounts in envelopes for categories such as groceries, gas and discretionary spending. The challenge is staying within your spending limit and not borrowing money from another envelope. “You also need to be careful to keep cash safe because you won’t have credit or debit card protections,” said Silva.

3. Round it up
If you like using your debit card to make purchases, add the round-up feature (if your financial institution offers it). With every purchase, the amount is rounded up to the nearest dollar or a set amount and transferred from your checking account into your savings automatically. The trick is not to spend more to save more and to keep an eye on how much is transferring so you don’t overdraw your checking. Look into overdraft protection to cover any potential miscalculations.

4. 70/20/10 rule
You may have heard of 50/30/20 budgeting, meaning 50% for needs, 30% for wants and 20% for savings. Now the formula has been updated to keep up with the rising cost of living—with 70% for needs, 20% for savings and 10% for wants. Note that the “wants” category shrank to accommodate the rising prices on needs for everything including housing, groceries, utilities and transportation. However, the savings category didn’t change.

“Saving remains essential—whether it's to navigate unexpected emergencies or afford major purchases—so you don’t have to dip into your everyday budget or rely on credit cards that can lead to debt,” said Silva.

The key here is to use a method such as automatic transfers to ensure you’re regularly contributing that 20% to your savings. It’s also important to avoid putting “wants” into your “needs” spending.

5. Zero-based budgeting
If you have a predictable, regular paycheck, you might try zero-based budgeting. The concept gives every dollar a job, or allocation, so you ensure you’re contributing to savings while also covering daily living expenses and having some spending money. Similar to the cash-stuffing envelope method, the plan consists of looking at your monthly income as a lump sum and putting portions into spending categories that you typically purchase (rent, gas, groceries, bills, debt payments, savings and discretionary), down to zero dollars.

Use a tool such as WalletHub, Goodbudget or a simple spreadsheet to see your categories. Then stick within those parameters. Some drawbacks are that it requires strict discipline, doesn’t always account for unexpected expenses or price increases, and it can be time-consuming to track every dollar.

6. CD laddering
If you want to earn more on your savings than what a regular savings account pays, consider putting savings into laddered Certificates of Deposit (CDs). This method divides savings into CDs with staggered maturity dates. For example, consider putting your monthly living expenses for the next 12 months into 12 CDs for one year, with one expiring each month. You earn interest for the year these expenses are in the CD. Then, when the CD matures, you can use the money for living expenses and reinvest the interest earned into your savings (earning compound interest), or use it as spending money. Keep in mind that CDs follow current interest rates, so they’re subject to change, but typically earn more than a regular savings account by a few percentage points.

Credit still matters
While saving for a backup fund is important, Silva also recommends maintaining good credit so you can qualify for a low-interest loan and have lower interest rates on credit cards if you need to take on some debt to cover a big-ticket emergency. “If your current credit score is low, work to rebuild it,” she explained. “Incorporate good budgeting practices to support overall financial health.”

If you’re just starting out with saving, all the different strategies may feel overwhelming. To keep it manageable, Silva recommends trying one strategy first. Then, if that one doesn’t work for you, try another until you find one you can stick to. “Building a consistent habit not only helps your savings grow through compound interest, it also can also give you a financial cushion when unexpected expenses come up,” she said.