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What are the best strategies for cash savings?

September 1, 2020

The personal saving rate in the United States amounted to 7.6 percent in 2019, compared to 11 percent in 1960. With so many people out of work during the pandemic, salaries slashed, and businesses closed down, the task of saving cash may seem Herculean. Even during times of prosperity, there always seem to be too many things for our money to do before we get around to saving and investing. And for some reason, no internet tips and tricks are successful in the long term. The problem might be in how most people go about saving their cash, which is why we’ve put together a guide to the best strategies for saving cash.

Small wins add up

When it comes to cash savings, small changes can add up over time. That’s why it helps to have a budget. With a budget you can figure out what you want to spend your money on and how much income you are bringing in to cover those expenses. When you have a budget to work with, you’ll be able to identify expenses that don’t fall into any of your anticipated spending categories and make a decision about whether to keep or eliminate them. For example, if you get charged every month for one too many subscriptions that you haven’t budgeted for, it’ll be easy to see exactly where you can cut expenses and save more money.

The only secret to this method is to be consistent with your spending and have an idea of what you’re spending money on. If your spending is dependent on external factors or has a high level of variance month over month, you will not be able to plan your spending successfully.

Pay yourself first

Treat cash savings like another bill you have to pay. The amount is completely up to you—it can be $25, $100 or maybe 10% of your paycheck. When you treat cash savings like an obligation, you aim to pay yourself first. It helps you recognize that your future self and your family is a priority, rather than an afterthought.

Most people wait until the end of the month to move any remaining balance from their checking account to their savings account. The problem is that not much is left over at the end of the month. There are always unanticipated expenses (even if you try to budget) or more tempting reasons to spend money. If you’ve already “spent” your money by moving a portion of it to savings earlier in the month, you’ll have to adjust your expenses to fit within your remaining cash. A few options could be delaying a non-urgent expense into next month or trying to earn more income to cover the remaining expenses.

Bonus points for “out of sight, out of mind,” which you can accomplish by hiding your savings account from your online banking overview or signing up for a savings account with a different bank entirely.


Don’t do challenges or tricks, build a system

You might have seen those challenges about saving $1,000 in three months all over the internet. Clearly, they work very well for many people. They may even be the kickstart you need to get your cash savings to a good baseline. But unless you’re planning on completing a three month challenge every three months, following savings tips and tricks work exactly like going on a diet. They can be very effective in a short period of time, but unless they help you build good habits for the long term, they may be ineffective at best and potentially harmful to your financial health. If you’re tempted to do a challenge to start saving, reevaluate every 30 days to encourage yourself to keep saving and investing.

Lock away your savings

If you know that you are not going to need your savings for a year or more, consider putting your savings into a GIC (GIC stands for Guaranteed Income Certificate). These are a great way to try to get more interest on your money especially if you’re saving for a mid-term goal that’s more than a year away. GICs usually have a minimum deposit required, so if you’re just starting out you may benefit from using a HYSA (High Yield Savings Account) while you build up your cash. You can browse online for the best deal and minimum deposit requirements online, and many banks now offer promotions or cash for opening up a savings account (do try to make sure that you go with a higher rate of interest in your account).

Use tech like Acorns and Qapital

Sometimes you have to be a little sneaky to save your money from yourself. In recent years, there have been many advancements in fintech and the gamification of personal finance that make it fun and engaging to save. Acorns, for example, allows you to invest spare change by rounding up the total from your transactions and saving the difference for you. Finance apps make it incredibly easy and exciting to sign up and let you save as little or as much as you want.We would encourage you not to look at this method as a primary tool for building cash savings for two reasons:

The takeaway

Your cash savings are just one piece of your entire financial picture, but it can be very useful in emergencies or market downturns (like the one we’re currently in). Having cash to fall back on, whether you’ve just suffered a setback like losing a job or whether you’re going for an opportunity like further education, can help you make the decision with the biggest long-term impact. By implementing some of the saving strategies above, you’ll better your chances of achieving the goals that are important to you.

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