Debunking the 9 Common Misconceptions About Saving Money
October 12, 2023
There are a million things on your plate, so the idea of prioritizing your savings may seem like a daunting task. If you’re struggling to build your savings, you are not alone. According to Forbes, the average American is saving less money now than in previous years.
With the state of the economy and inflation, saving money feels like more of a challenge than ever. But saving is one of the most important aspects of your financial health, it helps you stay prepared for life and whatever it may throw at you.
At Education First Federal Credit Union, one of the most common aspirations we encounter is the desire to increase personal savings. However, there are several misconceptions that often hinder people from taking the necessary steps to build their savings accounts. In this blog, we aim to debunk these myths and help you see that your savings goals are likely more attainable than you thought. Let’s get into it:
Misconception #1: "I Don't Make Enough Money to Save"
It's a widespread belief that saving money is only possible if you have a substantial income. The truth is that your ability to save doesn't solely depend on how much you make. No matter the size of your paycheck, with an effective budget and good financial management skills you can grow your savings. Start small, even if it's just a few dollars each week. Over time, this can add up significantly, and you'll develop a habit of saving. If you started the practice of dedicating a small portion of your paycheck each month to be placed into your personal savings account, you’d be surprised to see how quickly your balance could grow. To make saving even one step easier, pay yourself first. Decide what portion of your paycheck you want to allocate to savings, and have that amount directly deposited from each paycheck into your savings account.
Misconception #2: "I'll Start Saving When I'm Older"
Waiting to start saving is one of the biggest misconceptions that can cost you in the long run. The magic of compound interest can greatly benefit you if you begin saving early. Not so sure? Utilize our “Benefits of Compounding” calculator to see the difference a few years make. Your money has more time to grow and accumulate interest, resulting in a more substantial savings balance. Moreover, starting to save when you are younger helps you build financial discipline and develop sound money management habits. Education First Federal Credit Union encourages members of all ages to begin their savings journey as soon as possible. We even offer a youth savings account for children as young as 6 years old to begin their savings journey.
Misconception #3: "I Can't Save and Pay Off Debt Simultaneously"
Many people believe that they should prioritize paying off debt before saving. While it's essential to manage debt, you can and should save simultaneously. It may sound impossible, but working on both goals at once will help you in the long run. An emergency fund can help you avoid accumulating more debt when unexpected expenses arise. Start by setting a small portion of your income aside for savings while making consistent payments toward your debt. As your financial situation improves, you can allocate more towards debt repayment. If you’re still not sure how much to allocate, utilize our “Save Towards a Goal” calculator to help you plan and visualize your savings goal.
Misconception #4: "I Can't Save Because I Have Too Many Expenses"
It's easy to feel overwhelmed by expenses, they can be unexpected and it can feel like they just keep piling on. The key is to prioritize your savings as an essential expense. Create a budget that includes savings as a non-negotiable monthly expense, just like rent or groceries. By doing so, you'll make sure that you allocate a portion of your income to your savings account regularly. Education First Federal Credit Union offers iThrive, a free budgeting tool that will help keep you on track.
Misconception #5: "Savings Accounts Don't Yield Good Returns"
Some people believe that savings accounts don't provide attractive returns compared to other investment options. While it's true that the interest rates on savings accounts are generally lower than those on riskier investments, they offer security and liquidity. Education First Federal Credit Union offers competitive interest rates and a range of savings products, including Share Certificate (also known as a Certificate of Deposit), which offer higher interest rates for longer-term savings. These options provide a balance between safety and growth.
Misconception #6: "I Can Rely on My Retirement Savings"
Some individuals mistakenly believe that their retirement savings will suffice for all their future financial needs. While having a robust retirement account is essential, it's not a substitute for a dedicated personal savings account. Unexpected expenses, such as medical emergencies, car repairs, or home maintenance, can arise at any time. A personal savings account acts as a financial safety net for these situations and ensures you don't have to tap into your retirement funds prematurely. Even as you move closer to your actual retirement age, you may find yourself in a situation where you underestimated what your retirement expenses may be, having a personal savings nest egg could potentially help supplement your income in those years if necessary.
Misconception #7: "I Can Count on Bonuses, Inheritance, my Spouse, etc… to Build my Savings"
Many people hope for financial windfalls to jumpstart their savings or even make up for their lack of savings. While these can certainly help, relying on unpredictable events to fund your savings account is not a sound strategy. Instead, it's crucial to build a consistent savings habit, regardless of windfalls. Saving consistently allows you to work toward your financial goals steadily and ensures you are prepared for unexpected expenses.
Misconception #8: "I Don’t Have a Strong Enough Understanding of Finance to Save"
Some people refrain from saving because they feel overwhelmed or uneducated about personal finance. At Education First Federal Credit Union, we're dedicated to helping our members increase their financial literacy. We provide resources, financial education, and personalized advice to help you navigate the complexities of saving and investing. You don't need to be a financial expert to get started – we're here to support you every step of the way.
Misconception #9: "Savings Is Only for Emergencies"
While it's true that savings can serve as a financial safety net during emergencies, it's essential to understand that savings can be used for various purposes. Whether you want to go on a dream vacation, purchase a new car, or invest in further education, your personal savings account can help you achieve these goals. If you’re still feeling uneasy about your savings plan, you can always visit a Member Service Representative at one of our 7 conveniently located branches across Southeast Texas.
At Education First Federal Credit Union, we want to help you take control of your financial future by debunking these myths. We hope that the prospect of saving is a little less daunting after reading through this blog. By taking baby steps today and improving your budgeting and money management, you may find that saving toward your financial goals is more attainable than you realized. And we hope to help you get there.