Finding it tough to save for that rainy day or retirement? Here are four simple ways that anyone can put money away in a savings account or retirement plan.
Anyone who has lived paycheck to paycheck understands the frustration and concern of not being able to save for retirement or of not having a backup financial plan in case of emergencies.
Fact of the matter is that financial experts recommend having a savings account that is equal to at least three months’ living expenses. Yet only about one third of Americans have a savings account. And according to information from AARP, only one in three employees who are eligible to participate in a 401K plan at work actually do so.
So for anyone who is currently in this situation, here are four ways to put aside money without causing a major impact on daily living expenses.
401K Savings Plan
Many employers offer the option to put money into a 401K savings plan. The idea is to have money set aside for retirement. That means, the money is not accessible without penalty until the employee reaches the age of 59 ½. There are major benefits to joining such a plan.
The first benefit is that the money is automatically deducted from an employee’s paycheck. This means the money accumulates in an account and gathers interest without any additional effort on the employee’s part.
Second, many organizations have a matching contribution from the company so each participant is basically receiving “free money” from their employer.
Finally, the contribution is pre-tax. This means the deduction is taken from the paycheck first then taxes are calculated on the reduced balance, so employees are taxed on less.
Now committing any portion of an already tight paycheck to a 401K plan may give many people a reason to pause. However, saving even one or two percent is a start. And know that there are certain situations when this account can be accessed prior to retirement, such as for major medical or educational reasons. Anyone considering signing up for a 401K should check with their human resources department for specific details.
Direct Deposit
Another benefit that many employers offer is the direct payroll deposit. Once again the benefit is to have money automatically deposited into an account. Though generally an employee’s paycheck goes into their checking account, many employers may offer the option to earmark a percentage or flat rate to be placed into a savings account.
An alternative to this is the automatic transfer available through banks. By going on line or by contacting the customer service department, a bank customer can have a specified amount automatically transferred each month from their checking to their savings account.
Monthly Car Note
Okay, sounds funny, but anyone who has made a large monthly payment on a car or other expensive item knows what it feels like to longingly look forward to the time when it all ends.
But instead of spending that monthly payment once the item is paid off, commit part (if not all) of the amount to a savings account. Even saving $100 of what use to be a $300 car note will go a long way in boosting a savings account.
Money Jar
It’s a common phenomenon that men all over the United States come home from a hard day at work and empty their pockets of change. There it sits on the bedroom bureau just begging to be saved away in some money jar somewhere.
Collecting nickels, dimes and quarters on a daily basis and then carting them down to the back to deposit them into a savings account may not seem like a quick rich scheme, but it is amazing how quickly the pennies add up and with very little effort.
