How to start saving (even if you’re starting from scratch)

Saving money is not quite as fun as spending it, but money in the bank can be a lifesaver when you’re hit with unexpected expenses or a sudden job loss. When your bank account balance is down to just a few dollars, it can feel like saving money is impossible.

If you struggle to save money, know that you’re not alone. Only about 4 in 10 U.S. adults (44 percent) could cover the cost of a $1,000 emergency with savings, according to Bankrate’s recent annual emergency savings report.

You might think you need to make more money in order to save, but there are actually plenty of other ways you can start your nest egg today rather than tomorrow, ranging from simple habits to innovative digital budgeting tools.

Write down your savings goals

Having specific goals can help you save more money. Write down your savings goals or save them in a spreadsheet, and assign them names (like “emergency fund” or “new car fund”) and deadlines. Then, identify how much to set aside each month to have the full amount when you’ll need the money.

Using multiple savings accounts can also help you meet your goals, since you can devote one account to each goal and easily track your progress. This also enables you to easily shift your funds to take advantage of the savings account in your portfolio that offers the highest interest rate.

An alternative strategy is to use a single bank that lets you create categories — sometimes called buckets — within the same account that allow you to save toward different goals. Examples of such accounts are the Sallie Mae SmartyPig account and the Ally online savings account.

Create a budget

The idea of creating a budget can feel intimidating, but at its core, it’s simply about making sure more money comes in than goes out. While spreadsheets can be helpful for visualizing this, they’re only as effective as the budgeting rules you apply to them.

Track income and expenses

One way to track income and expenses is by using the 50/30/20 budgeting rule. Start by estimating your total monthly income, then allocate 50 percent to needs, 30 percent to wants, and 20 percent to savings. “Needs” typically include essentials like housing, food, healthcare, and transportation, while “wants” can cover things like streaming services, dining out, online shopping, vacations, and hobbies.

Fortunately, many checking accounts automatically categorize purchases — such as “entertainment” or “utilities” — making it easier to sort them into your needs and wants. This way, if your budget falls out of the 50/30/20 balance, you can quickly identify which spending categories need adjustment.

To help re-balance your budget, consider trying the 30-day savings rule. For any non-essential purchase, this rule suggests waiting 30 days before buying. The extra time allows you to assess affordability, research alternatives, and ultimately decide whether the purchase is worth it.

Take care of high-interest debt

According to a recent Bankrate credit card survey, over 50 percent of American credit cardholders are carrying a credit card balance from month to month. Given that annual percentage rates (APR) for credit cards typically range between 20 to 30 percent, carrying debt can quickly undermine all your savings efforts.

For example, let’s say you have a $6,000 credit card balance with a 25 percent APR. Using the Bankrate credit card payoff calculator, we found that even if you pay $500 per month, you’ll end up paying an additional $976 in interest before reaching a zero balance. 

While it might feel like paying off high-interest debt isn’t helping you grow your savings, in reality, eliminating that debt frees you from costly interest and creates a solid foundation for building real financial security in the long run.

Build an emergency fund

Without an emergency fund, a trip to the auto mechanic or a visit to the doctor’s office can derail your entire savings plan. If you’re forced to pay for an unexpected expense with a credit card, a personal loan, or even borrowing money from friends or family, you’ll find yourself paying interest — or possibly straining relationships — rather than building your financial security.

Find a home for your savings

Remember, no amount is too small to start saving — even a dollar counts. If you need to, go with a savings account that allows for low minimum balances.

Also, seek out a savings account with a competitive annual percentage yield (APY) and that either doesn’t charge monthly fees or lets you avoid them by meeting certain requirements.

Whatever bank you choose, consider using a money-saving app. If you have a checking account, for example, you can connect it to an app like Digit, which can automatically move small amounts of money it thinks you can afford into your savings every few days, to help you save more quickly.

There are plenty of other automated savings apps or bank accounts to choose from: Qapital, Albert, Ally Bank and Chime are a few options to keep you going and add some speed to your savings habit.

Keep checking and savings accounts at different banks

New savers may want to create a barrier between the money being saved and the money being spent, to make it less tempting to dip into the savings for impulse purchases.

You can do this by setting up your checking and savings accounts at separate banks. Then, connect the accounts via an automatic transfer from your checking into your savings account.

“It’s a psychological thing,” says Pamela Capalad, a certified financial planner and owner of Brunch & Budget. “When you open your bank account app and your checking and savings numbers are in there, you kind of add those numbers together and you’re like, ‘Oh, that’s how much money I have to spend.’ But if they are totally separate, you kind of forget.”

Find areas to cut your spending

It’s easy to buy things we know we shouldn’t — and no, we aren’t arguing that buying lattes is why more of us aren’t millionaires.

“If you want to get coffee, (then) get coffee,” says Mariel Beasley, co-director of Common Cents Lab, a financial research lab at Duke University. “But all of us can look back at our bank statement and say, ‘Oh man, I can’t believe I spent that much on that,’ or, ‘Oh man, I wish I hadn’t bought it.’”

Assess whether you’re wasting money on things you don’t really want or need. This can include subscriptions for streaming services, magazines or other services you find you don’t use. Cancel such subscriptions and put a portion of that money into savings.

If this sounds tedious, you can outsource the chore. Some subscription management apps, like Trim and Rocket Money, can cancel a bill on your behalf. If you want to call the shots on what expenses stay and go, try pairing the activity with something you enjoy. For example, don’t listen to the next episode of your favorite podcast until you take on the task. It’s known as temptation bundling — pairing something you want with something you don’t want to do.

“You create a way to reward yourself for doing an unpleasant but important activity,” Beasley says.

Find ways to grow your income

You may have cash streams you can allocate to savings, such as birthday money, funds earned from a side hustle or coins you’re cashing in for dollars. Choose one of your income sources and assign it as savings, Beasley says.

Bottom line

There’s no silver bullet for how to build a savings account. Techniques that work for one person might not work for another. Stay on the lookout for something or someone that motivates you to keep saving small amounts of money regularly.

–Freelance writer Drew Waterstreet contributed to updating this article.