HE-556
Consumer Economics
& Housing Topics
SAVINGS BASICS
Why Save?
The decision to save, and how to save, is an integral part of family and personal financial planning. It will influence your future, your standard of living at retirement, and your present level of living.

There are many reasons for savings, depending on your age, income, job, stage in the life span and number of children. Your values and goals also affect your savings.

What financial goals do you and your family have? You would probably like to have a solid financial foundation where assets and income are sufficient to handle comfortably both planned and unforseen expenses. For many, this broad goal starts with solvency — being able to pay current bills — and builds to the development of an estate plan (see Figure 1). 

Other goals are more tangible or shorter in range. You may want to save for a new car, to replace an appliance, or for a vacation.
Estate Plan—to transfer accumulated wealth
Investment Plan—to reach specific short- and long-term goals, such as retirement or child’s education
Home Ownership—to provide shelter and as an investment
Risk Protection—to guard against financial loss due to death, disability, property damage, illness, liability
Emergency Reserve and Access to Credit—
to pay unexpected bills
Solvency—to have enough to meet current expenses
Figure 1: Building financial security
Savings Routines That Work
Pay yourself first. Make savings part of your fixed expenses in your budget, much like your rent or mortgage or utility payments.

Use payroll deductions. You can arrange with your employer to have a certain amount deducted from your pay and deposited to a credit union or other savings plan. Many find this a "painless" way to save — if you never see it, you might not spend it!

Save windfall income. Try to save tax refunds, bonuses, overtime pay, gift money, refunds and rebates, and money saved by using cents-off coupons.

Pay installments to yourself. After you pay off an installment debt (car loan, furniture or appliance loan, etc.) continue to budget the installment payment, but put it in your savings account.

Collect loose change. Every week (or more often) empty out your pocket or wallet and put the change in a savings jar. Periodically (every other week or month) deposit the change in your savings account.

Try frugality. Cut out or cut back on something (for example, eat out less often) and put the money you don’t spend in your savings.

Break a habit. Every time you don't have a donut at coffee break or you don't spend money in the pop machine, save the money you didn't spend. If you give up other habits, such as smoking, save the money you would have spent.

Use club accounts. Many financial institutions have interest paying Christmas or vacation clubs which you can use to save for other goals, such as appliances, furnishings, etc. If your bank doesn't have such accounts, set up a savings account as if it were a club account and make regular payments into it.
Cooperative Extension Service • Purdue University • West Lafayette, Indiana

Cooperative Extension Work in Agriculture and Home Economics, State of Indiana, Purdue University and U. S. Department of Agriculture, H. A. Wadsworth, Director, West Lafayette, IN. Issued in furtherance of the Acts of May 8 and June 30, 1914. It is the policy of the Cooperative Extension Service of Purdue University that all persons shall have equal opportunity and access to its programs and facilities without regard to race, color, sex, religion, national origin, age or handicap.