piggybank savings

Getting Started with Saving

Think back to when you got your first job.  If you’re like me, you probably had people telling you the first thing you must do is “save your money!”.  For most, it was a parent, relative or friend telling you to save some arbitrary percentage of your pay cheque.  The source of the advice and the amount tends to vary but the general consensus was that you should at least be saving something. My grandma still gives me money and tells me to “save it for a rainy day”. But the problem with saving for a rainy day is that there’s nothing specific about a rainy day.  Which rainy day?  How rainy? That’s why the first key to saving is to do it with intention and be specific.   

When I discuss saving with clients, we talk about saving effectively, which is the idea of putting your money away with some degree of regularity and then actually staying away.  There are two components to saving our money and then leaving it alone. There’s the emotional or personal part and there’s the logical or the facts.  Said differently, it’s about distinguishing the difference between “needs” and “goals”.  

I got my first job when I was 15 and the sole reason was because I wanted to save enough money to buy a car when I turned 16. I didn’t want to save because my parents told me to, I saved because I wanted to have my own car which as a teenager represented choice and freedom. 

The “goal” is the feel-good or emotional aspect to saving.  In my example, the goal was to have the car and subsequent freedom that came with it. For the average person getting started, it can be saving for your first house, starting a family, or a charitable donation during the holiday season. The key is to know WHY you want to save.  What’s at least one thing that you don’t have the resources for today, that you would like to have in the future?  I say “resources” because it doesn’t necessarily have to be material or directly purchased for a specific dollar value.  It can be a lifestyle, flexibility, freedom, charitable giving, etc?  Whatever the reason, you have to know why you want to save.  

Then comes the “need”.  The need is the hard numbers to achieve or obtain the goals you’ve laid out.  It’s where the rubber meets the road and whether people like it or not, the money does matter.  Wanting to have money in the future is not a bad thing, in fact it’s a prudent and careful way of making sure your future self has something that your current self can’t have or do yet.  The need is how much you have to save on a regular basis in order to obtain your goal.  For example, “If my goal is to buy a car in one year when I turn 16, I need to save $40 every week, for the next year, in order to have $2,000” (‘assumes a 0% rate of investment return).  

Although the whole thing might feel a bit too adult for your newfound financial freedom, the best thing about getting started with saving, especially if you start young, is that time is on your side.  Getting started with saving young is the best gift you can ever give yourself.  

Now, the next question is, “How can I make the most out of my savings?”.  Stay tuned for the answer. 

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