Saving for a Rainy Day (or Really Any Day)

January 10, 2017

Without fail, January allows us to usher in a renewed hope for positive change in the new year. Using the gift of hindsight, we can look back at the previous 365 days and determine what worked—and what didn’t (fact: not everyone was meant to pull off the Macklemore “undercut”). The knowledge comes from being willing to fall flat on your face, then pick yourself up, and keep on keepin’ on. In other words: trial and error.

After years of anticipating the holidays with the same regard as a visit to the dentist, this past season went off, for many of us, without a hitch (financially-speaking). Thanks to trial and error, we here at The Dime were able to learn more and more about what does and doesn’t work for us money-wise—both during the holidays, and throughout the year. Below is some of that 411 we’d like to impart on you, dear readers. As always, if you like it, take it; if you don’t, send it right back (we may or may not be Ron Burgundy fans around here).

Holiday Fund

Ten months from now, when the 2017 holiday season is fully underway, wouldn’t it be great if you already had money set aside for gifts? Banks, and more commonly credit unions, help people do this every year through specially-designed accounts. Often called holiday accounts, the financial institution will transfer a pre-determined dollar amount from a checking account on a weekly or monthly basis. A common criticism of these accounts is the low interest rate, but the idea here isn’t to earn interest; it’s to stash away money for gifts ahead of time so you’re not faced with a “Do I purchase winter tires or presents?” scenario come December.

If your bank doesn’t offer a holiday account, you can easily set one up yourself. A tip: calculate the total amount you plan to spend on gifts, and divide that by the number of paychecks you’ll be receiving over the course of the year. Then, have that incremental dollar amount deposited directly into your gifts-designated account. It’ll hurt less psychologically than manually performing the transfers, and you’ll set yourself up for budgeting success. Win-win.

Emergency Fund

Common sense says that we should have a savings account for the little—or big—things that are bound to happen in life. Financial experts recommend anywhere from $1,000 to eight months’ worth of salary set aside for unanticipated emergencies. Regardless of whose advice you’re taking, the ability to set aside any amount of money, let alone thousands, can definitely be a struggle.

The key is to just start somewhere—no matter how slow-moving or laborious you think it will be. Begin by opening a savings account specifically for this purpose, bearing in mind that when it comes to emergency funds, the easier to get the money into the account, the better. Look for a bank close to your home or work so you can’t rely on the excuse of having to drive across town to deposit money. It’s even better if that bank next door has a sign-up bonus.

When starting out, the size of the individual deposit doesn’t matter; it’ll all add up (we promise). Did a friend give you gas money? Put it in the account. Did you find $0.50 on the ground? Put it in the account. Ideally, set aside some money, any money, from each paycheck through direct deposit.

College Fund

If you’re planning to take college courses this year or next, it’s worth investigating the pros and cons of using a 529 Plan. Even if you’re post-college, consider opening a 529 Plan to help a sibling, niece/nephew, or friend’s newborn prepare for his or her education. An excellent resource for better understanding how a 529 Plan can help pay for college and reduce your taxes can be found here.

Don’t beat yourself up about what you didn’t accomplish last year. 2017 is upon us, and now is as good a time as any to impart a positive change in your life. Best of luck with all of your goals this year—you’ve got this!

What money-saving hacks are you planning to kick off this year? Chime in below!