Savings plays a foundational role in financial progress. That is why it enjoys a spot as one of the three principles of money + life balance! You may be wondering how much to save, when it is OK to use that savings, and the best ways to save. You are not alone, we’ll get to the bottom of it all! Let’s make saving your superpower!
Savings is Essential
Let’s first take a moment to free you of the most common myth surrounding savings. You do not need to have 3-6 months of income in an emergency savings account. Seriously, please let that go. For most people, a much more achievable number will do, and right sizing savings frees you to move on to the next steps of financial progress, like tackling debt, or growing your money. Research shows that with just a few hundred dollars in savings you make stronger financial decisions. This cushion gives us security and allows our brains to relax which leads to healthier financial decisions.
At The Beans we set our Essential Savings objective at $2,500 and then move on to the next milestone. With $2500 in savings you are insulated from most economic shocks, meaning it’s enough to help you bounce back when something big comes up.
The order of operations is as important as the right-sizing goal. With so many things going on in our lives, we can really only take on one goal at a time, so we suggest focusing on establishing your Essential Savings before trying to pay down debt. Once you do, your debt pay off will go even faster.
When to Use Our Savings
Sometimes it’s hard to use our savings, even when we need it. We’ve got to be really clear about the purpose of an Essential Savings account: it is to smooth over financially difficult moments, to ease our stress when the (un)expected happens, like a car expense, co-pay, or prescription that’s not in our regular plan. Once we use our savings, we can focus on topping it back up.
This is different from the money we will use to grow our generational wealth! That money will live in accounts that earn for us. More on that once we establish our savings, and tackle any high interest debt (and don’t worry, we’re all in this together!).
“I find myself constantly dipping into my savings and I feel like savings should be for emergencies.” – Beans community member.Ever felt this way? Bria, an Army Reserve Captain and member of The Beans community shared that she felt guilty using her savings to pay for new tires after she got a flat. This is exactly what our savings is for! It can be hard to watch your hard-saved balance decline, but using your savings in circumstances like this will save you stress. If you use your savings your entire month won’t be disrupted by this unexpected expense. You will also end up saving money by avoiding interest and fees that come with charging these types of purchases to a credit card.
The Best Way to Save
The easiest and most effective way to build Essential Savings is through automation. As soon as the paycheck comes in, it’s automatically on the way to a savings account!
At The Beans we calculate your savings number and automate that savings so you never have to worry about it. On average our users save 5X more per month using Essential Savings, they went from saving $50 to $250 a month! Whether you automate with us or someone else, automation is a proven method to building your savings.
Saving is a critical step to achieving money + life balance and no matter your take home pay you can build your Essential Savings. Feel financially stronger and launch a cycle of strong financial decisions by unlocking your saving superpower.