Wednesday, December 14, 2011

How do your Saving Habits Rank vs. a Squirrel's?



You may think this is a joke but the stats say that squirrels are much smarter than us when it comes to saving up a 6 month emergency fund.  In fact, only 24% of Americans can match a squirrel's 6 month savings habit.  This tells me that humans don't have the willpower of a squirrel.  This is likely because without their savings, squirrels will die, and we can just rack up credit cards and loans, so we lack accountability.  So in order to save like a squirrel, we'll have to play some mind games.

Automatic transfers

This still remains one of the best methods to ensure you contribute to your savings every pay period.  People by nature have trouble letting go of their money, so it can be hard to manually transfer money into a savings account.  Most banks can set up an automatic transfer that puts money in your savings every month.  The only drawback is that you are seeing the money deducted from your checking every time.  The preferred method is to have your direct deposit set up so that part of every paycheck goes to your savings.  That way, much like taxes, you never see the money.  How much more annoying would taxes be if your gross pay was deposited into your account, and then the taxes were deducted?

Accessibility of accounts

Another problem people face when trying to save is that their accounts are too visible, and available. Every time you log into your checking account online, there's your savings account, just a few clicks away from becoming a new HD TV.  These "Keep the Change" auto transfers that banks do (every transaction is rounded up to the next dollar, and that change is put in savings) sound great in theory, but run into this problem of visibility. What I suggest here is using two different banks.  One bank for your everyday checking, and one that is used only for savings.  Don't even set up an online account for the savings account.  If you can't see it, you won't be tempted.

"I don't have enough money left over"

This is the excuse you hear the most.  People just don't have any money left over to save.  I will call you out on this.   There is no way that you can't spare ANY money for savings.  The problem is that you spend according to your income.  An easy fix for this is to set up the direct deposit transfer anyway.  You'll figure it out, because you'll have to.  I did this recently.  I set up a direct deposit at a much higher amount than I can afford, because it forces me to make it work.  I'll have to find places to cut expenses, hold back on unnecessary purchases, or find more places for additional income.

Squirrels are on to something

If humans were squirrels, we'd likely trade our stash of nuts in for the latest Iphone, and starve within a few weeks.  Back in the day, this is actually how things were.  If you ran out of money, you would starve.  Now, with credit cards, support systems, bailouts and loans, that accountability has vanished.  This is why many people don't ever worry about their savings.  I propose we go back to thinking like a squirrel.

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