5 Popular Savings Rules To Ignore in 2024 — And 4 Approaches To Try Instead
Written by
Cynthia Measom
Edited by
Ashleigh Ray
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If your current mantra is “new year, new financial habits,” a wise first move is to rethink how you save. Unfortunately, while saving seems like it should be simple and straightforward, oftentimes, it’s not.
The solution? Get rid of stale savings rules as you head into the new year and opt for ones that financial experts say you should try. Here are five popular savings rules to ignore in 2024 and four alternative approaches.
Popular Savings Rules To Ignore
Here are some popular savings rules to ignore in the new year.
Pay Off High-Interest Debt Before Saving
Jennifer Kropf, a certified financial education instructor, money expert and the founder of Wealthy Woman Finance, said that one strategy that she thinks isn’t as effective as it used to be is focusing solely on high-interest debt repayment before building savings.
“With inflation being so high, it’s important to have at least a basic emergency fund to avoid debt in case of job loss or unexpected expenses,” she said. “Now paying minimums on loans and putting extra toward savings is a better first step. You can then focus more on loans once you have a safety cushion.”
Keep Savings in One Single Account
Kropf said that another outdated approach is keeping your savings in just one account.
“While convenient, it’s risky to have all your eggs in one basket,” she said. “Should something happen to that account, you lose everything. I recommend dividing savings among multiple accounts at different institutions nowadays. That way if one account is compromised, your other funds remain protected.”
Only Use a Traditional Savings Account
Khwan Hathai, a certified financial planner and certified financial therapist at Epiphany Financial Therapy, said that while traditional savings accounts are considered fundamental, they may not be the best standalone strategy in 2024.
“The typically low-interest rates offered by these accounts often fail to outpace inflation, which can lead to the gradual devaluation of savings over time,” she said. This necessitates exploring other savings avenues.”
Opt for Strict Budgeting Methods
Hathai said that using strict budgeting methods, like the envelope system, may cause you to lose motivation to save.
“In our increasingly digital financial world, these methods can be overly restrictive and not flexible enough to adapt to the dynamic nature of modern spending and saving habits,” she said.
Save 10% of Your Income
“The generalized rule of saving a set percentage of income, such as 10%, may not suit everyone,” said Hathai. “This approach doesn’t take into account varied individual circumstances like differing income levels, debt burdens and personal financial goals.”
Savings Approaches To Try Instead
Now that you’re aware of some popular savings rules to ignore, here are some savings alternatives to try instead.
Utilize Automatic Transfers
“As for alternatives, automatic transfers are helpful for consistency,” Kropf said. “Whether it’s a fixed dollar amount or percentage each payday, automating the pay-yourself-first process makes it effortless.
“Linking multiple accounts allows seamless division of funds too. Coupled with a budget to stay on track with financial priorities like emergency savings, goals, bills — automatic saving prevents savings goals from slipping through the cracks.”
Gamify Savings Through Apps
Kropf said she also suggests gamifying savings through apps.
“Many make it fun through visual trackers and achievement badges,” she said. “Competitions with friends can light a competitive fire too. Finding what motivates someone personally and using positive reinforcement goes a long way in improving finances sustainably. Don’t hesitate to get creative!”
Hathai agrees that apps are a good approach.
“Embracing flexible budgeting tools, like budgeting apps, is another smart move,” she said. “These apps provide real-time spending analysis and adapt to your financial behavior, offering a more personalized approach to budgeting and saving.”
Open a High-Yield or Money Market Account
Hathai suggests looking into high-yield savings or money market accounts for liquid savings. He said, “These options often offer higher interest rates compared to traditional savings accounts, providing a better opportunity for your savings to grow.”
Create a Customized Savings Plan
“Additionally, creating a customized savings plan that reflects your unique financial situation is crucial,” added Hathai. “This might mean adjusting the percentage of income you save based on your affordability, prioritizing debt repayment or setting specific savings goals that align with your financial objectives and lifestyle.
“In the realm of money psychology, it’s essential to choose savings strategies that resonate with your financial behaviors and personal values.”
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