March’s Savings Tip
Eight Fun Ways to Save Money
Elizabeth PopeFrom the AARP Bulletin print edition | March 1, 2010
Americans are snapping their wallets shut and socking money away amid economic doldrums. The nation’s personal savings rate—hovering at zero just two years ago—has risen to about 5 percent—the highest rate in 15 years, according to the U.S. Commerce Department.
Experts say paying down debt and saving more is a sensible response to job layoffs, declining home prices and dwindling 401(k)s. Smart people, particularly those age 50-plus, are going to have to save. “If you don’t want to work forever, ultimately you’ll be responsible for paying for retirement,” says Dallas L. Salisbury, CEO of the Employee Benefit Research Institute (EBRI).
Still, saving money seems like dieting. You know you should do it, but it isn’t a lot of fun. “Financial entertainment”—programs, incentives, games and devices that make thriftiness more fun—can help ease the pain. Here’s how:
Roll Your Change
Watch the pennies, and the dollars will take care of themselves.
American households have an estimated $10 billion in spare change stashed in jars and piggy banks, according to Coinstar, maker of coin-counting products. For years, Akron, Ohio, welder Wesley Lance, 63, emptied his pockets into a growing collection of coffee cans. When Lance’s credit union waived coin-sorting fees during Roll Your Change week last year, his wife, Linda, 59, a bakery worker, hauled 20 cans into the bank using a child’s red wagon.
The teller announced the mounting total as she fed the sorting machine. “Everybody stared at me while the teller called out, $1,000 … $2,000 … $3,000,” says Linda. “It was just like winning at the slot machines in Las Vegas.” The final tally—$4,120.18—was a shock. “If we’d known we had that much, we’d have stuck it in a CD.” Meanwhile, it’s stuck away safely, waiting for interest rates to go up.
Roll Your Change is one of many programs around the country sponsored by America Saves, a national campaign sponsored by nonprofit, government and corporate groups to encourage money-saving habits. Check AmericaSaves.org for more information.
Pay Cash
Stash your credit and debit cards and pay cash for purchases—you’ll spend up to 20 percent less, studies show. Credit cards, gift certificates and debit cards are like Monopoly money, says Priya Raghubir of New York University’s Stern School of Business. However, if credit cards are a necessity, she suggests keeping a record of expenses by categories like food, gas or entertainment.
“Cash has a face value, so it feels more real, more transparent,” Raghubir says. “There’s a little pain attached to parting with it.”
Track Every Cent
Fred Ecks, 43, of Boulder, Colo., learned long ago to live on half his gross income from investments. In the mid-1990s, the former computer programmer slashed spending to pay down $12,000 in credit card debt. He banked half his salary, investing it mostly in bonds. He was so thrifty, he would eat at home before joining friends at a restaurant, then just order a beverage.
“I didn’t get money from my parents or hit it big in stock options or win the lottery,” he says. “I just saved the majority of every paycheck for years. It’s not very sexy, but it sure does add up.”
These days, Ecks says, he volunteers about half time and goofs off a lot. He lives “like a king” on about $1,200 a month, including $609 on entertainment and electronics, $300 for food—he cooks at home—and $93 for health insurance. He has a bike instead of a car. He paid cash for his house, a three-bedroom, one-bath bungalow. He tracks every penny to eliminate mindless expenditures. “A Starbucks cappuccino costs $4—but how much will I enjoy it?” he says.
Think about what makes you happy, says Avi Karnani, vice president of strategic innovation at LendingTree.com. “Choose your smiles and cries, we say. Sure, you can bring coffee from home, but maybe a Starbucks latte reminds you of your former work life and energizes you for the job hunt.”
Avoid status purchases, he adds—shared experiences bring more happiness than material goods. For free online tools to help track expenses and save money, check out MoneyRight at LendingTree.com.
Match Your Money
For those who already know the joy of saving regularly, a new nonprofit, SaveTogether, makes it easy to spread the message while helping others reach their financial goals. Using an online philanthropy model, SaveTogether helps low-wage individuals triple their savings through the power of matched savings accounts.
Here’s how it works: A saver puts aside $25, a donor makes a secure, tax-deductible $25 donation on the website, which is then matched by $25 from government and participating nonprofits. Prescreened savers are profiled on the website and file reports on their progress saving for college, a new home or a business start-up.
“These stories of people who are at the bottom of society’s pyramid can inspire us all to be better savers,” says Dylan Higgins, CEO and founder of SaveTogether.
SaveTogether.org will soon include a map of local programs that sponsor Individual Development Accounts, matched savings accounts for the working poor.
Tell Your Story
In her first job, Marylyn Ervin, 73, made 50 cents an hour working for the telephone company. “I saved up and bought my first new winter coat. That was such a big thing, because before I’d always worn hand-me-downs,” says Ervin, who was one of 12 children on a Depression-era farm.
Now co-owner of a successful family grocery store in Morganfield, Ky., Ervin enjoys telling her 23 grandchildren childhood tales of getting only one toy at Christmas or using a kitchen dishpan as a sled. Telling stories to children and grandchildren helps transmit family values about hard work and money, says Nathan Dungan, author of Prodigal Sons and Material Girls: How Not to Be Your Child’s ATM.
“Grandparents can play an important role in passing on values like thrift, saving for a rainy day, deferring gratification and surviving bumps along the road,” says Dungan, who founded Share-Save-Spend, a nonprofit that teaches financial literacy.
Many families have difficulty discussing money, says Dungan, but grandparents can tell children things a parent can’t. “You can’t just tell these stories once,” adds Dungan. “Children hear something different at age 5, age 10, age 20. It’s the repetition of storytelling that reinforces a family’s core values around money.”
Save to Win
Barbara Cornish, 56, of Detroit, struggled to save money every month, but she withdrew $50 to $100 from her small savings account at Communicating Arts Credit Union when tempted by a new purse or a pair of shoes. “I just wasn’t disciplined,” she says.