Saving money can be difficult. Even with the best intentions, responsibilities and conflicting priorities may reduce our desire or ability to save. Even with these constraints we should try to find ways to save. Here is a list of small changes we can make that result in big savings.
Apply for scholarships. In the United States 68.4% of Americans will attend a post-secondary institution immediately after high school. 70% of students graduate with an average student loan debt of $30,000 (National Centre for Education Statistics). Scholarships are a great way to fund some or all of post-secondary education. Not all scholarships are based on academic merit, but include other criteria’s like financial need, community involvement, gender, cultural backgrounds etc. In Canada $5 million of scholarship money goes unclaimed each year (London Free Press). In the United States over $2.9 billion scholarships and grants go unclaimed (Nerd Wallet). Students that do apply for scholarships receive about $10,000- $16,000 over the course of a 4 year degree (National Centre for Educational Statistics). For many public universities this can cover up to 25% of tuition fees.
Enrol in your employer’s retirement matching program. Employers may offer a retirement matching program where they will match the full amount or a portion of what you contribute towards your retirement. These programs are usually administered by an outside investment company through a group retirement plan. Monies are usually tax sheltered in a Registered Retirement Savings Plan in Canada, or a 401k in the United States. If you contribute $200/month towards retirement and your employer matched your contributions dollar for dollar, you would have $400/month going towards your retirement. Assuming a modest 5% rate of return over 5 years that becomes $27,202.21. Contrast this to putting only $200/month of your own money with no matching over the same time period and it would be $13,601.36. Although some employer group retirement matching programs may limit your flexibility in choosing your investments, many offer the ability to move monies invested when you leave the company. Make sure you understand all restrictions and fees before moving money out of a group retirement plan.
Register for a bank plan that rounds up your purchases and saves the difference. Many financial institutions realize how difficult it is to save. The introduction of saving programs that round up your debit purchases and put the difference into a savings or investment account help people save effortlessly. In the U.S. Bank of America has the ‘Keep the Change’ program where purchases are rounded up and transferred to a savings account. Fin-tech apps like Acorns also round up purchases, but invest the difference in low-cost ETFs, taking 0.25% to 0.50% in management fees. In Canada, Scotiabank offers programs like Bank the Rest to make saving money easy.
Have less taxes withheld at source. Depending on your personal and financial situation, the government may be withholding more taxes each paycheque than they need to. Ask your employer for a copy of your most W4 (in the Unites States) or TD1 form (in Canada) and review this information with an accountant. If you are able to reduce your withholding tax, immediately redirect the additional amount into a savings account.
Pack a lunch 3 times a week. There are 262 working days in a calendar year and the average American spends $2,746/year on lunch at work. If a lunch was packed 3 out of 5 of the working days in a week this would translate into a savings of $1,647/year. Gradually reduce how often you eat out each week. For example, if you normally buy lunch every day of the work week, start by scaling back to buying lunch 4 times a week for a month and save the difference. The following month try only buying lunch 3 times a week. Continue scaling back until you reach the savings goal you desire.
Implement the 72 hour rule for impulse purchases. Impulse purchases are purchases we make without prior research or intention of buying the item (i.e. if it is not on the shopping list, it is probably an impulse purchase). These spending habits can significantly eat into savings and in many instances lead into financial debt. The 72 hour rule forces a waiting period of to determine if you really want to make the purchase. If you still want to purchase the item after 3 days, you are less likely to have buyer’s remorse.
Implement a ‘self-improvement’ jar. We all have areas in our lives that we would like to improve. For some it may be to stop swearing, start working out, stop ordering from their favourite restaurant each week etc. Motivate yourself and your household by implement a self-improvement jar in your home. Whomever breaks the rules must put an $X amount of money into the jar. At the end of each month the money can be deposited into a savings. Self-improvement jars are most effect when there are few participants, a level of trust and honesty and a desire for all to improve in the area in question. An exercise like this will hopefully develop good spending behaviour.
What small changes are you making to save more money?