When it comes to savings, US consumers are way below emerging economies like China and India. Compare US savings rate of about 3.9% to that of China’s whopping 38% or India’s 34%. What is your savings rate?
A good technique to start an effective savings plan is to have one! Set aside an amount, any amount from your paycheck into a high yield savings account. Make this transfer automatic. This is very important. If you are apprehensive, set it aside with the intention of moving it back if you need it later. Start small, you can always increase it later.
This technique works and works everytime. Instead of sporadically saving, you now have a plan. Savings become a habit. One reason why 401Ks work. Unlike a 401K, with this technique you have the flexibility of moving the money back if you need to. But trust me once you see your savings grow, it would be real hard to think of dipping into your savings! (I’m counting on it!).
Try it out for yourself. Set up an automatic transfer from your paycheck. Start small – your don’t want to overdraft on your checking! Increase the amount gradually. Don’t fret over the amount, it is more important to get into this habit than the actual amount.
What’s the worst that could happen – you may end up having a lot of savings and not know what to do with it!