How to save money: 10 tips

Man sitting on sofa at home with cellphone, looking up how to save moneyImage: Man sitting on sofa at home with cellphone, looking up how to save money

In a Nutshell

Learning how to save money begins with identifying your savings goals and creating a budget to help you track and reduce your expenses. A bank, credit union or online savings account can be a smart place to store short-term savings, while investing could be a better fit for long-term goals.
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All financial goals, from building your emergency fund, to buying a home, to preparing for retirement, share one thing in common: You need to save money to accomplish them.

For this reason, developing a savings habit is the first step toward achieving financial freedom. Let’s take a closer look at the various ways you can save money and compare short-term versus long-term savings goals. Then we’ll cover how to decide between a saving or investing strategy for your money, and we’ll share 10 money-saving tips to help you reach your goals.

What is the easiest way to save money?

There are many ways to save money easily. And some of those options may provide a higher return on your initial funds, although they may take more time or carry extra risk.

One of the easiest ways to save money is to open a deposit savings account with a bank, credit union or an online financial institution. If you choose to open this kind of account, make sure to compare your options and consider factors such as minimum balance requirements and account fees.

Money market accounts are similar to deposit savings accounts in many ways. But the interest rates they offer tend to vary, and they may allow you to write checks from the account. They also typically require savers to maintain a higher minimum balance.

Today, many banks, credit unions and online providers offer high-yield savings accounts, like those offered by Brio Direct, Citi and Live Oak Bank. At the end of March 2021, the average national rate on savings accounts was 0.04%. But each of these high-yield savings accounts currently offer rates of 0.40 % or higher. For this reason, a high-yield account could be one of the easiest ways to save money while maintaining easy access in case you need it.

Another option to consider — if you can afford not having access to your funds for a few months or years — is a Certificate of Deposit, or CD, which could also offer a competitive interest rate. Or if you have money that you won’t need to touch for several years, consider investing in the stock market, which could offer even higher returns over the long haul. Just be mindful that investing is inherently risky because of market volatility.

What are your savings goals?

So what type of savings account should you choose? It depends on how you prefer saving money — as well as how and when you plan to use the money. Let’s take a look at how to save for three common types of savings goals.

Saving for a rainy day

According to a Federal Reserve report, nearly 40% of adults said they wouldn’t be able to cover an unexpected $400 expense. Additionally, the Federal Reserve found that one-fifth of adults had a major unexpected medical expense in 2018.

These numbers illustrate how important it is to build up an emergency fund. But how much should you save? The Federal Reserve notes that saving three months’ worth of expenses is a good start, while some experts recommend saving up to six months’ worth of expenses.

For emergency fund savings, accessibility is key. When emergencies strike, waiting a few months for a CD to mature before you can touch your funds won’t be an option. For this reason, a high-yield savings account may be one of the better places for your emergency-fund savings.

Short-term savings goals

Short-term savings goals are financial goals that you’d like to accomplish in the next few years. Buying a car, paying down debt and saving for a vacation could all be short-term savings goals.

Some short-term savings goals don’t require the need for easy access like an emergency fund does. And that can allow you to consider other types of savings accounts. For example, if you know you won’t be buying your car for over six months, you may be more willing to put that money in a CD.

Long-term savings goals

Once you’ve fully funded your emergency fund and you’re on track with your short-term savings goals, you’ll want to start thinking about your long-term goals. This could include buying a home, saving for retirement or saving for your child’s college education.

With long-term savings goals, you may want to consider putting your money in a tax-sheltered account to maximize your returns. This is especially true for retirement savings. If you have the opportunity, an IRA or employer-sponsored 401(k) are two good places to save your retirement funds.

If you or someone in your family are considering higher education, look into 529 plans, which can help you save taxes on college savings.

Saving vs. investing: Which makes sense for you?

The benefit of a high-yield savings account is that it’s built to help you save faster, and it’s considered a safer alternative to the volatility of investing. But investing can potentially offer a much higher return over time. That’s why when it comes to personal finance, saving is usually a better strategy for short-term goals while investing may be the better option for long-term goals.

Timing matters

How do you decide when a financial goal should be labeled as short-term or long-term? According to the Consumer Financial Protection Bureau, or CFPB, short-term goals can take up to five years to achieve, while long-term goals may take five years or longer.

In general, the longer it will be before you need the money, the more you should consider investing in assets that have higher risk because you’re hoping for a payoff down the road. So, for example, if you’re planning on retiring in 30+ years, you’d want to consider a riskier investment portfolio than if you were retiring in the next three years.

But keep in mind that timing isn’t the only factor to consider. When calculating your overall goals, you’ll want to also take into account other factors including how much money you’d like to earn from your overall investments as well as your tolerance for risk. Stock markets are inherently risky and if every fluctuation is going to make you swoon, you may want to look elsewhere to grow your money.

Saving best practices: 10 tips

Here are 10 money-saving tips that could help you hit your savings goals faster.

  1. Create a budget. The first step to saving more is setting a monthly budget and tracking your spending. If the thought of budgeting is unfamiliar to you, consider following the 50/30/20 rule budget. With this budgeting strategy, you’ll allocate 50% of your budget to needs, 30% to wants, and 20% to saving and paying off debt.
  2. Automate your savings. Setting up a recurring deposit from your checking account to your savings account can be a smart saving strategy. Automating your savings can help because you’ll no longer have to remember to log into your account to move money to your savings. And it could help you avoid spending the money on unnecessary things.
  3. Save your tax refund. If you tend to get a big chunk of change back from Uncle Sam each year, consider putting a certain percentage of it away in your savings account.
  4. Cancel unwanted or unnecessary subscriptions. From music and videos, to magazines and clothing — there’s a subscription for everything today. But those small monthly fees can add up fast. And the worst part is that you may be paying for services that you don’t even use any more. Scan through your bank account or credit card statement to find any monthly bills that could be eliminated from your budget and help rein in your spending.
  5. Plan out your meals for the week. Weekly meal planning can help you save money in two ways. You may be able to take better advantage of coupons and bulk discounts on groceries. And it could help you cut back on your unplanned restaurant expenses.
  6. Shop your auto insurance rates. Just because your current car insurer quoted you the best rate a few years ago, doesn’t mean it’s still the best deal today. The only way to find out is to get new car insurance quotes. Credit Karma recommends shopping for auto insurance on an annual basis.
  7. Use credit cards that offer rewards. By taking advantage of sign-up offers and ongoing rewards, credit cards could help you save for short-term goals like that family vacation. Just make sure not to spend on your card more than what you can comfortably afford to repay to avoid paying interest — or racking up debt.
  8. Avoid credit card interest. As of February 2020, the average credit card interest rate is just above 15%. When you’re dealing with an APR that’s higher than 10%, incurring interest charges on your credit card transactions can hurt your savings goals. Aim to pay off your entire statement balance every month, or consider transferring your balance to a credit card that’s offering an introductory 0% balance transfer APR.
  9. Schedule a home energy audit. A home energy audit could help you save up to 5% to 30% on your home energy bill, according to And your local government or utility company might even offer a subsidy to offset the cost of the audit, which tends to run anywhere from $300 to $500. Learn how to find a professional energy auditor in your area.
  10. Take advantage of an employer 401(k) match. If your company offers an employer-sponsored 401(k) account, it may also offer a match. For example, your employer may promise to match up to 3% or 5% of the contributions you make to your 401(k). These matches double the savings power of every dollar you contribute to your 401(k) up to your employer’s cap, so max them out whenever you can.

What’s next?

Starting to save can feel overwhelming, but when you break down why you want to save into clear goals, it may be easier to start developing a savings strategy. Just remember that you don’t have to hit all of your savings goals today. If you don’t have an emergency fund yet, start there. As you work to build it up, you may be surprised by how it reduces your financial anxiety and helps you sleep at night.

Once you’ve got a savings habit going, you can start fleshing out your short-term and long-term savings goals. And then you’ll want to make sure that those savings goals show up on your budget.

New to budgeting? Credit Karma’s Guide to Budgeting will tell you everything you need to know to create your first budget and stick with it over time.

About the author: Clint Proctor is a freelance writer and founder of, where he writes about how students and millennials can win with money. When he’s away from his keyboard, he enjoys drinking coffee, traveling, obse… Read more.