How to Save in Tough Times

Regardless of the economic situation, there is only one sure fire way to have savings: to spend less than you earn.

It is increasingly hard to save with the costs of basic necessities like rent, food, fuel and public transport but there are ways to save, even in tough times.

So let’s go back to the fundamental premise of saving: Spending less than you earn.

How to spend less money than you earn

The first step to starting or continuing to save is to understand what are essential expenses and what are non-essential.

• Can you skip one cup of coffee at a café a week?
• Can you cut back on eating out?
• Can you reduce your electricity consumption?
• Can walk somewhere that you would normally drive and reduce your fuel use?

Even if you find a way to reduce your spending by just $10 a week, that’s a great start. Over a year that will be $520 in savings that you didn’t have before. Small amounts of savings add up quickly!

Choosing a Savings Account

Once you’ve identified where you can make savings the next step is to choose a savings account. While many accounts that are used every day are savings accounts, as opposed to cheque accounts, you can go one step further.

Open an account that will earn you a higher interest rate. Every day accounts usually have low interest and as such, the money you save will not grow and plus, you’ll be tempted to spend it.

A high interest saving account will allow interest to accumulate as you continue to add your savings to it. You do have to declare any interest earned on your savings in your tax return, but ultimately the interest earned will increase your savings long term.

To ensure that your savings are added to your high interest savings account, set up an automatic transfer from your every day account. This way you won’t forget and you can’t spend it. The other benefit is that the longer sooner the money is in the account, the sooner it starts earning interest.

To encourage saving, even with small amounts of regular deposits, most high interest savings accounts don’t charge monthly fees. So look at how much the annual interest rate is. Some accounts offer bonus interest for opening an account or reaching a certain balance.

Starting to save can begin any time that you decide, even now in this interesting economy.