Having savings of as little as $100 can prove decisive in helping keeping a household’s finances afloat, according to new research. In a year during which many Americans have found themselves out of work or struggling financially due to the coronavirus pandemic, a new report from the FINRA Investor Education Foundation and SaverLife found that people who maintained more than $100 in savings were much less likely to have their utilities shut off or need to resort to high-cost borrowing methods such as payday loans.
Those with a savings balance of over $100 were also much more likely to say they were financially satisfied, while families with more than $250 in savings saw a significant reduction in the risk that they might lose their housing for financial reasons such as not being able to pay the mortgage.
“Before the COVID-19 pandemic, [our] research indicated that many Americans were struggling with low wages, income volatility, debt and little or no emergency savings,” said FINRA Foundation President Gerri Walsh. “We now know that even a very modest savings cushion correlates with significant life improvements.”
A little savings can go a long way
Focusing on the savings habits of nearly 700 lower-income households, the research found that people who failed to maintain a savings balance above $100 were 95% more likely to have their utilities shut off compared with those who consistently had more than $100 in reserve.
Similarly, families with under $100 in savings were found to be 83% more likely to use high-cost borrowing, such as auto title loans, payday loans, refund advances, rent-to-own stores or pawn shops, than those who had $100 to call upon when needed. Borrowing in these ways can often lead to problems with debt, and sometimes require the services of debt consolidation companies to help manage.
Using the best personal loans online and credit cards is far less risky if you need to bridge financial gaps, but it is hoped that the research will demonstrate how even the smallest amount of savings can play a significant role in keeping families afloat financially during difficult times. And with stimulus check 2 now on the way, the survey could help persuade some of the benefits of putting some of this money aside if it’s eventually delivered, and they possibly can.
“This report supports what we’ve known all along—that just $100–$250 in savings can have a dramatic impact on the well-being and financial future of millions,” says Leigh Phillips, CEO of SaverLife.
Even if your income doesn’t seem to immediately allow for saving money, or you struggle for motivation to put money aside, hopefully the research will have demonstrated the benefits of having even the smallest financial safety nets to call upon if needed. Here’s some savings tips to help you further:
Make a start
Whether it’s the loose change you find in your pocket, or $5 from each paycheck, you need to start somewhere, and it doesn’t matter how small the amount is. Regularly put the cash you can spare into your savings, and you’ll be surprised at how quickly the funds can build up.
Having a savings goal in mind can be a great incentive for some people. Again, it doesn’t need to be big - as the research reveals, $100 can make a significant difference, so maybe that’s a good place to start. If you’re able to set a bigger target then do so, but make sure it’s attainable, so that you can enjoy the renewed motivation that meeting one goal can provide to set another.
Plan what you’re going to save
If you know your income and your expenditure, you’ll also better understand what you can afford to save each month. The best personal finance software can help you keep on top of your finances, while there’s plenty of free apps, such as Mint and PocketGuard, that you can try too.
Some people might be able to set up an automatic deduction from their paycheck to go into savings. Or if you’re expecting a tax refund from the IRS, or a stimulus payment, why not earmark some of that money to go into savings.
Where to save
If you’re starting small, there’s nothing wrong with simply putting money aside in a jar in the first instance. As your savings grow, however, you’ll want to approach the best online banks, just to keep it safe and to make the most of interest that’s paid on savings accounts.
Use your savings wisely
Always try to keep in mind the main aim of why you’re saving. That way, you won’t be tempted to dip into your savings when you simply fancy a coffee or some new shoes. At the same time, don’t be afraid to use the money when you really need to. Recent research found that over half of Americans have taken on debt rather than use their savings to get by, but that’s not the idea - if you’ve got money set aside to cover emergencies, it’s far better to use them than pay interest on whatever you borrow.