When it comes to saving money, I often hear that saving small amounts of money isn't worth the trouble. While the time and effort needed to gain the savings certainly needs to be taken into account, the truth is that small amounts of money can have a dramatic effect on your overall financial health.
When people look at money, there is an assumption that saving and spending are relatively the same. That is, saving $15 a week is the opposite of spending $15 a week. In reality, it doesn't balance out quite as smoothly since the amount you can earn in interest on your savings is much less than you are likely to pay in interest for borrowing the money.
With all the hype about carefree spending, the truth is it takes very little to start sinking into debt. Take the $15 example above. $15 a week (a little over $2 a day) is not what most people would call extravagant spending, but see what happens if one can save this amount rather than fall into debt by this amount.
Let's say you begin setting aside $15 every week in savings, earning 3% interest. If you can save this amount each week, you'll end up with a little bit more than $4000 in your savings account after 5 years.
What if the opposite occurs? Let's say you come up short by the same $15 per week over the same five year period and use your credit card to cover the shortfall. You'll end up with about $6000 in debt assuming an 18% credit card interest rate. That $15 a week adds up to $2000 more in debt than you can save.
So after 5 years at a bit more than $2 a day, you can find yourself with a nice little sum of money in the bank or owing a hefty amount on your credit card. What makes the two examples even more telling is that we are talking about an overall difference of less than $5 a day (less than an hour of work at minimum wage), yet the result on a person's finances is dramatic.
As the above example shows, saving small amounts can have a large impact on your personal finances. There are hundreds of money saving tips on this site that take little time to implement or you can join the free Daily Money Saving Challenge to learn how to save over $3500 a year in only 10 minutes a day. Above all, remember that saving small amounts of money is worth the trouble most of the time.
This is a good article. I recently had a client who had her house in foreclosure, yet every time the SS check came in the mail she could not wait to get into her car and buy a lottery ticket. I commented on saving the money so she could pay her bills. The response, $10 won't do anything. Most people do not realize that $10 here and there adds up to no foreclosure, etc. The elderly are getting real used to their children bailing them out. Frankly, I am tired of paying someones taxes or mortgage for this very reason. I think all charity should be cut until people wake up and understand they are responsible for themselves. When did we turn Marxist?
Yes a few years ago I decided that I got into debt mostly a little at a time...it wasn't the big stuff so much as it was all the little stuff I charged that did it. So I began to think about turning that around and thinking about saving small amounts and realized th savings could really add up to! In the past I always thought I had to have a larger amount before it was worth savings. But now I'm excited about saving what ever I can. Counted my piggy bank last night...$15+ ...didn't take long at all. Will save til end of year and then put it on our debts. At this time most of what I can save I put on debt but can't wait until I can actually put it in the bank! :-)
When I was growing up, my parents were always talking about growing up during the depression. One thing they talked about was how some people bought stuff "on time". One man in particular when he had an extra dime or nickel, would use it to pay on his bill although he didn't pay it all off. My dad would say how that would eventually add up even though it was a little bit at a time. It made me think that I needed to do that and I opened a small savings account and would put whatever extra I had in it each week whether it was a $1 or $5 or more. It was a great help when we went on strike because I had something to fall back on and it was virtually painfree savings because I never felt like I was doing without anything. We do this same thing now by putting extra money in a vacation fund account and a Christmas club account until we get a total we want.
if i get the opportunity to shop at kroger, i save money using thier card, and taking my own bags with me also gives me a 3 cent discount each bag thats used. 3 cents is 3 cents. ten bags is 30 cents on top of the kroger saving and on top of my coupons, thats another coupons worth all on its own. it adds up, look at a reciept from farmer jacks card or kroger card, average shopping savings is listed. i took my mom shopping to show her the coupons experience, she put up all the coupons i let her have, and she spent 150 dollars shopping. it would of cost her 370 w/o the coupons and taking my own bags. thats almost half! and i prolly used a coupon for an item that would of made that difference to make it half the cost had i still had the coupon.
I worked at a small savings and loan. I got the impression that people were too embarassed to bring in small sums of money to add to their savings. don't be, the tellers don't mind at all. Kids do it all the time. I once told my girlfriend to just save $5 a week, but she said the sum was too little to mean anything. Well, that was 25 years ago and if she had listened to me, she would have saved $6500 without interest, with interest , probably double that. She still has 0 in savings.
it really does add up, being theres 52 weeks in a year. people sometimes dont look at the long haul of it. i do put some in jars i have around the house but still no acct. id like finding out more about bonds. by the time my kids are grown, they will have something to get started with.
Sometimes when my Dh spends money on something we can live without, he would say: it's only $2, but he has it done so many times, that I am saying now: that's a 1000th time you are telling me that, imagine you would have extra 2K now?
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MONEY SAVED IS BETTER THAN MONEY EARNED
Why?
Because You Don't Pay Tax On It !!!
Yes a few years ago I decided that I got into debt mostly a little at a time...it wasn't the big stuff so much as it was all the little stuff I charged that did it. So I began to think about turning that around and thinking about saving small amounts and realized th savings could really add up to! In the past I always thought I had to have a larger amount before it was worth savings. But now I'm excited about saving what ever I can. Counted my piggy bank last night...$15+ ...didn't take long at all. Will save til end of year and then put it on our debts. At this time most of what I can save I put on debt but can't wait until I can actually put it in the bank! :-)
Marglo- 15buckosplus- why not take it by the bank next time you're out and go ahead and pay it down on your debt? Every little bit you pay in principal whether on a credit card or mortgage, is that much less they can charge you interest on. This is how I got out of CC debt. Every Saturday morning like clockwork I took all the change I had accumulated during the week sometimes 1.16 others 3.53 - in these small amount ranges and deposited it to my checking and then went home and sent it online to my CC company! Soon - no credit card debt!! It may seem like small potatoes but if you get enough small potatoes together, my dear, you have a feast!
Good luck on your savings! Hang in there!
~~LuxLivingFrugalis
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"Economy is a poor man's revenue; extravagance, a rich man's ruin." ~~??, frontspiece, The American Frugal Housewife, by Lydia Maria Child, Harper & Row, 1836 edition (dedicated to those who are not ashamed of economy).
That is what I do with my challenge money and I am amazed how much it has grown. Saving and putting the money away every time I use a coupon or my ingles advantage card makes sense to me. so what if it is only $2 or $3 , it adds up. I never spend my change, it all goes into my change jar and I cash it in once a month or so.
I also pay extra on my land mortgage principal each month.
One of the things that made the no-spend Challenge profitable for me was that I focused on my cash in hand. I saved what I didn't spend, and at the close of the Challenge, I banked a hundred dollars. Aside from food and gas, all the savings were from the little odds and ends I would normally buy in the course of a week or two. Nothing extravagant or even self-indulgent, but not especially needed or rewarding either.
Somebody coined the expressions "latte factor" to describe the money that dribbles through our fingers in the course of the week in the form of habitual spending. Meaningless in the moment, it adds up over time. Nothing wrong with designer coffee, but do I really want that $4 java jolt on the way to work when the alternative is $900 more in savings annually? My choice, but to make it I have to be conscious of my spending.
Little things do add up. My morning paper at fifty cents a copy ($2 Sunday) is a $260 hit at the end of the year. Worth it? Judgment call, but worth thinking about. The point is that we nickle and dime our budgets to death and then wonder why we can't or don't save.
Marglo- 15buckosplus- why not take it by the bank next time you're out and go ahead and pay it down on your debt? Every little bit you pay in principal whether on a credit card or mortgage, is that much less they can charge you interest on. This is how I got out of CC debt. Every Saturday morning like clockwork I took all the change I had accumulated during the week sometimes 1.16 others 3.53 - in these small amount ranges and deposited it to my checking and then went home and sent it online to my CC company! Soon - no credit card debt!! It may seem like small potatoes but if you get enough small potatoes together, my dear, you have a feast!
Good luck on your savings! Hang in there!
~~LuxLivingFrugalis
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Congratulations on being out of credit card debt. I will put this concept into practice and see how it works for me. Thank you for posting this response.
Thank you, LuxLiving, for posting your approach to getting out of credit card debt. My husband and I were proud to get past a Chapter 13 Bankruptcy. For those who do not know, Chapter 13 is a bankruptcy that is a structured debt payoff. You pay the bankruptcy trustee and that person pays the debt. We paid faithfully on the debt every payday and when we done, we restructured our budget to allow for eating something better than pork and beans and peanut butter. We were never late on a single payment. The bankruptcy was dischared in July 2004. Saving this money after the bankruptcy discharge allowed me the next year to look for a new, better job and accumulate a nest egg for the move. We only charged the moving van to the credit card and quickly paid it off. The only problem is, earlier this year, I had to have surgery that was not anticipated. My insurance paid for 80% of it, but I am still left with a bill of over $1000. I also had a bunch of measly little bills, like from the radiologist, anesthesiologist, and who knows what else. My husband also had to go to the emergency room (he is not covered by a health insurance plan) and his bill is over $3000. We also have $100 left to pay on our used truck. So, I have been paying as much as I can to get these paid off as soon as possible, but I find that we are nearly running out of money every month right before I get paid. My husband was laid off from his job at the beginning of August, but will begin working at another company starting this coming Saturday. He and I have worked out a deal where with every paycheck he gets, all but $50 of it goes towards some part of our debt. The truck debt and medical bills definitely do have to be paid, but there is no interest incurred with them. Once he starts getting paid, we will start with paying off my medical bill with all the extra money he can give me, because it is the smallest and we will get huge satisfaction from seeing it paid off. I am accumulating some coins and bills in an envelope and will go to the bank on Saturday and deposit it and pay off a little bit on one of the debts. I also have a credit card with a $600 balance and a whoppingly huge APR of 18%! I am going to apply for another card through my bank and transfer the balance. Hopefully, my good record with them will amount to a better rate. We rarely go out to eat or the movies. We only have cell phones with a family plan - no land line. We have Internet, but it is the cheapest Internet we can get without a land line. I take my lunch to work every single day. I am just not sure if there are a whole lot of other ways to cut our expenses. Anyone have any ideas?
Sure Crazyliblady - post some of ya'lls ACTUAL FIGURES and see if this crowd can't come up with some specific ways to save. See a recent thread on here called Same Old Story for lots of good ideas.
For starters what kind of deductibles do you have on your car insurance? Can you increase it to get more cash into your pocket? How about your exemptions for tax refund at work? Can you increase the number of exemptions to get more cash in each paycheck?
I'm finally getting the picture, too. We nickeled and dimed ourselves into this cos when we had the big items, we didn't have the money saved for them. We didn't spend a ton on a house, more expensive cars, or lots of furniture so we congratulated ourselves on our spending. All the while, not watching the small stuff adding up til you can't pay outright for insurances, medical bills, colleges, autos, or even house repairs. It was a shock how much it matters. We have definitely changed our mindset, but it is a long road to recovery.
I heard it said that we try to save on the big items when it's the everyday consumable stuff that we should be saving on. If I can save 20% on the toothpaste, That's a great savings.
I woke up one day about 3 years ago and realized I really needed to straighten my finances out - I had credit card debt as long as I could remember and gradually it got to be higher and higher. I started a 2 1/2 year "spending freeze". I paid as much as I could on my debt. Every raise, tax return etc. went to the debt. Luckily I was able to consolidate it all on one CC with a 2.99% interest rate (that helped a LOT). At the same time I also started sending $10.00 every Friday to my ING account. I eventually upped it to $20.00 every Friday. Fast forward to now, three years later. All debt is paid off and I actually have $8K in my emergency fund (not in ING anymore, went to GMAC for higher interest). I don't think I've every felt better about anything - it's just a great feeling to actually be able to save money. I even bought 3 CD's (never had enough to buy one before).
One thing I know for sure is that if I can do it, anyone can!
I'm new here - I'm sure most of you already know this, but a good way to make money on the cash you've saved is to put it into an online savings account like ING Direct or Emigrant Savings. I believe ING Direct still has an offer if you set up an account, they'll add $25 to it. The interest rate right now is around 4.50% and you can access your money when you need it. The interest adds up fast.
I had never had an online bank until ING Direct. I did so because of this forum and it was such a possitive experience that it encouraged me to do other online banking. ING is easier than most onliners.
I started my $20. savings challenge there. I had money all over the house that I added to my account. It is easier than you think. Jeffrey has encouraged us to take $20. and find a way to make more money out of it. In the begining, it might be to make interest with it. Later on, it could be buying material and making something to be sold.
The $20. savings challenge has definitely expanded my thinking in many directions.
Why Saving Small Amounts Of Money Does Count
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