Finding Small Pocket Change to Yield Big Savings

It may come as a surprise, but even small amounts of pocket change can help you build a hefty savings account. Don’t overlook the potential to save even $20 a month, if that $20 can end up being diverted to an interest bearing savings account. Over time, that $20 can grow into $240 a year, and near $1000 in four years, with the right strategies and compounding interest. Many people may overlook small ways to save thinking it isn’t sufficient to create a decent emergency buffer or worth the financial incentive. Nothing could be further from the truth. The hard numbers show that the earlier you start saving, the more that small amount grows. It also helps to create savings habits that last a lifetime. 

Start Young and Grow Wealthy

Even if all you have to spare is an extra $100 a month, that can mean a substantial amount of money if that habit is put in place when you’re 25. By the time you’re ready to retire, that amount can grow close to $175,000, if you’ve found a savings vehicle with an 8% interest rate. However, if you wait until you’re 35 to start saving that $100 a month, you’ll find that the same habit only yields close to $136,000 by the time you’re ready to retire at age 65. The moral is clear: start early and grow wealthier.

How Can You Save Even A Little Each Month?

Granted, it’s not easy to find a spare $100 a month for most people because they don’t know where to look. People who graduate these days may be saddled with student loans and credit card debt. Later, they may be caring for children or aged parents. Either way, there are some places to look that can help you locate the spare change you need to find to divert it into a savings account.

Direct Deposit Your Raise Into A Savings Account - If you got cost of living raises in 2009, the temptation may be to increase your standard of living. However, you can also maintain the same standard, and feel no pinch by diverting the raise into a savings account, while maintaining your original paycheck return in a primary account. This will put money in the bank every time you get your paycheck.

Review Your Insurance Needs - You might be able to save money each month by reviewing your insurance deductibles and raising them, where possible. The money you save on the monthly premium can then be directed back to a savings account. Maybe you’ve reached 20% equity in your home and can stop PMI payments. Always review your insurance yearly, and shop around to get the best deal. Whatever you save, can go directly to your savings account.

Take Advantage of Pre-Tax Programs - Flexible spending accounts can help you save money on medical, dental, eye care, and child care expenses. You put the amount of money you think you will use for the year, and it gets taken from your paycheck on a pre-tax basis. If you are in a high tax bracket rate, this can be a substantial savings each year.

Cook From Scratch - If you are a good cook, you can save money on meals out and never miss them. Not only that, but processed and prepared foods cost more at the grocery store than those that you create from scratch. Learning how to cook is a skill that is not only enjoyable, but it saves you a lot of money in the long run.

Review Your Monthly Bills - Do you know what you’re paying for cable, Internet, phone, electricity, gas, and more? Find other carriers who can save you money, reduce your energy needs, or get rid of any service that you don’t use enough to justify the expense. If you have a cell phone, for instance, do you really need a land line too? Many people find that can pull in an extra $100 just getting rid of an extra cell phone or a land line that they no longer use.

Get Rid of Your Subscriptions - Do you really need a daily newspaper, several magazine subscriptions, and a membership to a CD club? With Internet access, you can look up much of the same information for free, even movies on Hulu.tv. Take a look at what you’re watching on TV and find out whether a cable subscription is still important when you can get movies for $1 anytime you want at the local grocery store through movie kiosks.