If the recent coronavirus pandemic has taught Americans one thing, it’s that you should always have money in savings. You can never really know what will happen next in life. It’s not always a global pandemic that can turn your life upside down.
Job loss, having a medical emergency, or experiencing the death of a loved one are just a few examples of major life events (and unexpected expenses) that will require a hefty amount of savings to get through.
The good news is that it’s never too late to start getting serious about your emergency savings. There are plenty of places where you can save money and offer various rewards as incentives. The current balance of your savings account isn’t as important as how frequently you add to it.
How to Figure Out a Target Savings Goal
- Review all of your expenses and withdrawals
- Determine your essential expenses
- Decide on non-essenial expenses
Every person will have a different target number for their savings bank account. The general idea of “three to six months of expenses” is an excellent rule of thumb, but it’s a fairly vague concept. The easiest way to calculate an exact number for yourself is to review the last several months of your personal finances, including bank and credit card statements.
Review All of Your Expenses and Withdrawals
The first step is looking at all the withdrawals and expenses from the last few months. You’ll need to separate each of them into two categories: essential and non-essential expenses.
Determine Your Essential Expenses
Essential expenses are your necessary living expenses. Anything that you need to continue surviving. The best examples are your rent payments, groceries, insurance premiums, transportation costs, and debt repayments. These are the most important bills that you need to be able to cover in an emergency without having to incur more debt.
Decide on Non-essential Expenses
Non-essential expenses are things you would like to have but don’t necessarily need to. Dining out at restaurants, shopping sprees, sporting events, and other luxuries of life are the first things that need to be cut in a financial emergency. There’s no point in saving up for them as your money will be better spent on essential expenses.
Savings Goal Example
Let’s say that your essential expenses add up to roughly $4,000 each month. Your financial goal should be to save up at least three times that amount: $9,000. You should save up at least six times that amount: $18,000.
Of course, there is nothing wrong with saving up more than six months' worth of expenses. Life-altering events don’t always last for just six months and get better. The more money you save up, the more peace of mind you’ll have.
How Much Does the Average American Have in Savings?
The coronavirus took a fairly significant toll on the average American’s savings balance. The average savings account balance reached as high as $73,100 in 2021 but dropped to just $62,086 in 2022.
It’s important to remember that the United States is a massive country and home to well over 300 million people. The average cost of living, salary range, and wealth distribution for each state vary wildly. For example, a job paying $15 an hour would get you much further in Mississippi than in Hawaii.
The point is that each person has their unique financial situation, so try not to get too caught up in the numbers. You might have a low account balance compared to the “average” American, but that doesn’t necessarily mean you’re broke. That’s why it’s so important for you to calculate your own personal savings goal amount.
Another fact is the “average” savings account balance mentioned above is a bit misleading. It takes into account all Americans, including millionaires and the super-wealthy. By diving into the raw data of Americans and their current savings, we can start to see a more accurate representation:
The first statistic is that roughly 36 percent of Americans don’t have enough savings to cover a $400 emergency. That’s a fairly bleak category to fall under, considering that the inflation rate is rising and the cost of nearly everything is growing daily.
Another statistic far from ideal is that 51 percent of Americans have $5,000 or less in savings, with 35 percent having less than $1,000. There aren’t many places in the country where $5,000 can cover at least three months of essential expenses.
The last thing worth mentioning is that the median savings account balance is $4,500, and the median emergency fund balance is $2,000. The distinction between the two is largely because most Americans have more than one savings account.
General savings are typically used as a secondary checking account, while an emergency fund is the type of savings we’ve discussed today.
What Are Some Ways To Save More Money?
- Automate savings
- Create a strict budget
- Cut back on non-essential expenses
- Get a roommate
- Use public transportation
- Meal plan
- Entertain yourself for cheap
- Sell your old stuff
It might be wise to increase your savings if any of the previous statistics apply to you. It’s impossible to predict when the next emergency will occur, and you need to have as much money as possible to help you get through it.
There are a few different ways that you can make saving into a game, but here is what you need to do if you want to increase your savings seriously:
Automate Savings
One of the easiest ways to lose weight is to put less food on your plate. The same general rule holds for saving money. Setting up an automatic savings transfer can help you to increase your savings and cut down on your spending.
All you have to do is set up a certain date and amount you want to transfer. It can be once a month, once a day, or whatever you feel comfortable with. The money will automatically be transferred from your checking account and into your online savings account on each specified date.
Create a Strict Budget
There are a lot of different budgets out there that can help you to save money. Some are way more strict than others, so you’ll need to decide how intense of a budget you need.
The standard budget is known as the 50/30/20 budget and is a good starting point. The whole idea is that 50 percent of your income should go toward essential expenses (“needs”), 30 percent toward non-essential expenses (“wants”), and 20 percent toward savings/paying off debt.
Cut Back on Non-Essential Expenses
Once you’ve calculated your ideal savings goal, you should know how much money you spend on non-essential expenses each month. The easiest way to increase your savings is to cut back on these non-essential expenses.
While that sounds simple enough, it’s going to be much more difficult than it sounds. You’ll need to reconsider the amount of money you spend on your clothes, monthly memberships, restaurant habits, and entertainment—the more of these expenses you reduce, the more money you’ll save.
Get a Roommate
Chances are that housing is your highest monthly expense. Having a place to sleep at night is necessary, so you can’t eliminate this expense. However, there are a few ways that you can reduce the costs. The easiest method is to take on a roommate. The bills can be split however the two of you decide, but every bit will help you save more.
Another option would be to downsize your current living situation. Selling your house and buying a cheaper one could reduce your monthly mortgage payments. Alternatively, looking to rent a house or apartment that’s a little bit smaller can also cut down on costs.
Use Public Transportation
Having your car is a luxury that can make life much easier and give you a strong sense of independence. Unfortunately, it's also very expensive and might not be worth it when you’re looking to save more money. Most major cities provide multiple options for public transportation that is often way less expensive than the price or maintenance of a car.
If public transportation isn’t an option for you, then there are still ways to cut down on costs. Carpooling to work can help you save gas money, and using a bicycle on the weekends are a few examples. You could also sell your car and buy a cheaper, used one to eliminate a monthly car payment.
Meal Plan
Eating out at restaurants is a good way to enjoy life and experience new cuisines. The problem is that it’s also very expensive and quickly adds up. Cooking your meals at home will give you an excellent opportunity to save money while enhancing your cooking abilities.
Each meal you cook from home will save you several dollars. It won’t take long before you realize how much you were overpaying for your favorite dish from your favorite restaurant.
Entertain Yourself For Cheap
It’s not an easy task to stay entertained when you’re strapped for cash. It’s even more difficult to remain engaged when trying to avoid spending. Boredom is one of the greatest enemies to savings and will be a constant thorn in your side.
The bad news is you’ll most likely need to cut back on streaming services, video games, and going to the movies so that you might be pretty bored on weekends. The good news is that library cards are free and open you up to a vast new entertainment world. A library card will give you unlimited and free access to books, computers, board games, research databases, and the opportunity to meet new people.
Sell Your Old Stuff
It’s guaranteed that you have a lot of clutter around your home. Humans like to hold onto things they own even if they stopped using them long ago. One easy way to make a little extra money is to sell off all the old stuff you no longer use. You’ll have more space to enjoy and some extra cash in your savings account.
On the flip side, you should try to buy more used items whenever you go shopping. The only difference between a brand new frying pan that costs $45 and a used one that costs $3 is $42 in your savings. You can save money by buying used clothes from the thrift store. Feel free to wash them however often that makes you comfortable, but nothing beats designer jeans for 95 percent off.
How Can Yotta Help?
It doesn’t take much searching to find a bank or credit union that wants you to open an account. Pretty much every financial institution offers some type of reward or incentive so that you choose them over the competition.
While each of these programs will typically help you save more money, it will usually take a long time before you see any results. That’s why it’s a good idea to look into using Yotta instead. Yotta is an online-based savings account option that offers a few different incentives than traditional banks.
Most banks will apply a fixed interest rate to your savings account. The more money you have in your account, the more interest you’ll be paid. The problem is that these interest rates are typically very low, as the national average is only about 0.05 percent annually. In other words, having a $1,000 balance in your savings would only net you about 50 cents in interest after an entire year.
Yotta doesn’t operate in the same way as these traditional financial institutions. For starters, the interest rate for a Yotta savings account is 0.20 percent annually which is four times the national average. While that should be enough to switch your savings account, it’s not even the best part. Yotta also pays out interest in the form of weekly entry tickets.
The way that it works is pretty simple. You’ll receive one ticket for every $25 in your Yotta account. Each key contains six numbers and a Yotta Ball. Starting Monday night of every week, a number will be drawn at 9 PM EST.
The final number (the Yotta Ball) will be drawn on Sunday night. Depending on how many numbers match the ones on your ticket, you could win the following prizes:
- Match three numbers, but not the Yotta Ball: 15 cents per ticket
- Match four digits, but not the Yotta Ball: $7 per ticket
- Match five numbers, but not the Yotta Ball: $3,000
- Match six numbers, but not the Yotta Ball: Tesla Model 3
- Match the Yotta Ball, but zero other numbers: 10 cents per ticket
- Match the Yotta Ball and one additional number: 15 cents per ticket
- Match the Yotta Ball and two different numbers: 75 cents per ticket
- Match the Yotta Ball and three other numbers: $10 per ticket
- Match the Yotta Ball and four different numbers: $2,500
- Match the Yotta Ball and five different numbers: $10,000
- Match the Yotta Ball and six other numbers: $10,000,000
Increase Your Savings The Smart Way
There is no exact amount of money you need in savings. It will largely depend on your current financial situation, lifestyle habits, and desired level of security. Still, having enough money to cover your essential expenses for a few months is probably a good idea. No telling what can happen in your life and how long it will take before the damage is done.
However, there’s nothing wrong with maximizing your savings as much as possible. After all, the more money you have in savings, the more peace of mind you’ll have. That’s why it’s a good idea to look into using Yotta.
Visit Yotta today so you can open a Yotta account, make your first deposit, and join in next week’s sweepstakes. The more you save with Yotta, the more chances you’ll have to win the jackpot. All it takes is a little luck, and you’ll have enough savings to cover several years of essential expenses.
