This article is part two of a two-part series.
Part of establishing financial stability and managing money is learning how to save. While saving is not a mandatory part of life, it is the best way to ensure you’ll have enough money in case of emergencies or for a big purchase in the future.
Three years ago, I started setting money aside to save for my expensive sneaker habit. I was set on buying several pairs of Jordans for over $200 each, but quickly learned that blowing an entire month’s spending money on one pair of shoes was not the best idea. I opened a savings account explicitly for sneakers—trivial, I know—but it started my journey to becoming the saver I am now.
According to Chase Bank, the average college student will graduate with at least $25,000 in debt. With the cost of education going up and debt rising along with it, saving is an important tool for college students hoping to make quick progress toward their loans after graduation.
Last week, I gave some advice on budgeting. This week, I present you with some tips and tricks that have helped me rack up my savings quickly.
Set a goal for yourself
By setting savings goals, you can avoid relying on loans and credit, according to Bankrate. Setting both a numeric goal and a purpose for saving will guide you on your journey toward financial success.
I have three active savings accounts: one for emergencies, one for “experiences” and one for big future purchases. While I don’t have a certain dollar amount goal for each of these accounts, I do have thresholds they have to stay above. My emergency fund cannot go under $2,000, and I like to keep my “experiences” account above $500, which I use for concert tickets, travel and various other adventures.
Maintaining different accounts for each goal helps organize your finances and keeps you from dipping into one big savings bucket for everything. If you have a specific dollar amount in mind, you can set a deadline for achieving that goal and work backward to figure out how much to save each month.
When I budget, I split my money after expenses in half for spending and saving. I have four primary accounts for savings, so I divide the savings chunk into four parts, one for each account.
Start with an emergency fund
If you don’t have a specific savings goal in mind but want to put money away for “just in case” purposes, start with an emergency fund. NerdWallet says an emergency fund is a bank account designated to help with large, unexpected expenses. I have an emergency fund that I pull from for any work I need done on my car, unexpected medical or vet bills and other things of that nature.
I keep my emergency fund at no less than $2,000 because I always want extra money in case things get worse. Maybe I just got my car worked on, but the next week I wind up sick in the hospital. If I spent my entire emergency fund on the car, I would have no money to help me with hospital bills.
Starting an emergency fund will help protect you from going broke on that one dismal rainy day. If you save for emergencies, money will not be your primary source of stress when accidents happen.
Open a Roth IRA
We may all feel too young to start saving for retirement, but it is never too soon to start planning for your finances in the distant future. A Roth IRA (Individual Retirement Account) offers a way to set aside money for retirement tax-free, according to Fidelity. When you establish a Roth IRA, you do not pay taxes on your investments annually, nor when you withdraw money in the future.
A Roth IRA allows you to choose specific stocks, bonds and ETFs to invest in. I have a Roth IRA through Robinhood, which has an option to auto-select investments based on your financial goals and level of risk.
Roth IRAs are limited to $6,500 in contributions annually, but I have never hit that ceiling. Since I started my Roth IRA in 2023, I have made almost $1,500 on my investments. As the economy fluctuates, be prepared to see your investment numbers rise and fall.
Find a high-yield savings account
Most savings accounts pay you a tiny bit of interest for saving with their bank, but high-yield savings accounts offer higher interest rates. First Fed says that high-yield savings accounts can earn up to 20 times more interest than a traditional savings account with no added risk.
I opened a Marcus by Goldman Sachs high-yield savings account during my first year of college. I saved every month and used that account to cover tuition, textbooks and housing expenses. I paid off my student loans in March because of how much that account helped me grow my money.
High-yield savings accounts are perfect for saving to pay off debt, for big purchases or for those who simply want to watch their funds get larger over time. NerdWallet has a list of the best high-yield savings accounts available.
Photo courtesy of Welch State Bank.