7 Things You Must Do If Your Savings Account Is Less Than $10,000
Written by
Laura Beck
Edited by
Renee Ross
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If you have a savings account with less than $10,000 in it, you’re not alone. Many people struggle to build up their savings, especially if they’re dealing with financial challenges or unexpected expenses. But having a small savings account doesn’t have to be a permanent situation.
There are plenty of things you can do to boost your savings and put yourself on a more solid financial footing. Let’s explore some of the most effective strategies for growing your savings account, no matter how small it may be. Whether you’re looking to save for an emergency fund, a down payment on a home or simply a rainy day, these tips will help you get there faster.
Make an Emergency Savings Account Goal
According to Todd Christensen, author of “Everyday Money for Everyday People,” it is important to determine your own emergency savings goal. Although generic advice from radio hosts or financial advisors may suggest saving a certain amount, it is essential to consider your profession and monthly living expenses when calculating how much you need to survive a period without income due to unemployment or medical issues.
To get a more accurate estimate, Christensen suggests dividing your annual income by $20,000 and then multiplying the result by your monthly living expenses, which should include essential costs like housing, utilities, groceries, clothing, transportation, cell phone and internet.
For example, if your monthly expenses are $3,000 and your annual income is $100,000, you would divide $100,000 by $20,000, which equals five months without income. Multiplying this by your monthly expenses of $3,000 results in an emergency savings goal of $15,000.
Make a Budget, Track Your Expenses and Curb Unhealthy Spending Habits
In order to increase your savings, you should create a budget by carefully monitoring all of your expenses, said Prof. Michael Collins, CFA and CEO of WinCap Financial. By doing so, you can identify where your money is being spent on a regular basis and determine where you can make changes and reduce expenses to save more money.
Collins also advises taking a hard look at what you’re spending money on.
“If you find that you are spending money on items you don’t need or that don’t add value to your life,” he said, “look for ways to reduce or eliminate those expenses.”
Make Specific Savings Goals
“Identify short-term and long-term savings goals and create a plan to reach them,” Collins said. “Monitor your progress and reward yourself when you reach your goal.”
Christensen suggests going beyond just setting a dollar amount as your savings goal. He recommends identifying specific ways you will use the money to make it more motivating. To achieve this, he advises opening a separate savings account for each goal. For instance, you can have one account for emergency funds, another for appliance replacement and another for vacations, among others.
Christensen further suggests that you should name each savings account accordingly. Instead of simply calling an account “vacation fund,” give it a unique and specific name such as “Mickey’s Spending Money” or “Harry Potter Adventure,” if you plan to take a family vacation to Orlando. You can conveniently name your accounts through your bank’s or credit union’s app or website.
Collins said you can make this easier by automating the transfers to your savings account or utilizing round-up savings tools can help you grow your savings without the need to remember to do it manually.
Put Tax Refunds and Extra Income Toward Your Savings
“When you receive a tax refund or any other extra income, put it straight towards your savings,” Collins said. “This helps to ensure that you are maximizing your savings potential.”
Invest
While you might not feel that you don’t have enough money in the bank to invest, that might not be the case. “Investing can help build your savings over time,” Collins said.
“Consider stocks, mutual funds and even real estate investments,” said Linda Chavez, founder and CEO of Seniors Life Insurance Finder. “Investing your money can help it grow faster than a regular savings account.”
In the end, it’s best to speak to a financial advisor to determine the best investments for your goals. Your bank might even offer this option for free, so check that out and ask friends and family for suggestions as well.
Start a Side Gig
Side gigs can be a fun way to help expand your income while capitalizing on skills you already have.
“We’re all good at something, and it shouldn’t be that hard for you to figure out a way to turn your talents into cash,” said David Bakke, a financial expert at DollarSanity. “Research the internet for details according to your personal skill set.”
Use Credit Card Rewards
Bakke said individuals with good credit can benefit from credit card sign-up rewards programs, which can help them make a considerable amount of money. For instance, if a credit card offers a $500 reward for spending $3,000 within the first five months, that money can be considered free and can contribute toward reaching a savings goal of $10,000.
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