Ben Franklin's statement that a penny saved is a penny earned is timeless money management advice. Although many parents know that meeting goals for the future requires saving even when money is tight, they aren't always sure how to get started.
The first step to saving is getting out of debt. "Look at finances holistically," says Phil Fragasso, a registered investment advisor based in Boston, Mass. "If you're carrying credit card debt and paying interest from 9% to 20%, pay it off even before trying to save. Paying off debt at 15% interest is equal to getting a 15% return on your savings accounts," he notes.
Fragasso is co-author of "Your Nest Egg Game Plan: How to Get Your Finances Back on Track and Create a Lifetime Income Stream."
What if saving even $50 per month seems difficult, if not impossible?
"You may need to make some lifestyle decisions today to improve your lifestyle tomorrow," he advises. For example, "People make lifestyle decisions to eat better, exercise more, or spend more quality time with the kids. It's the same thing with saving," Fragasso explains. "Make some lifestyle decisions today, when you're young, to put away some savings that will enhance your lifestyle when you're older."
For instance, he suggests, buy a 37-inch TV instead of a 46-inch TV and save several hundred dollars, buy cars that are two or three years old rather than new ones and save thousands of dollars, and borrow DVDs from the library instead of going to a movie theatre—you'll save $20 to $50 per month, he points out.
Also, set your savings goals and write them down. That's because as with other goals, says Fragasso, "savings goals are more likely to be achieved when written down."
Before you spend, think about whether the item is something you need or something you want. Reducing the amount of money spent on things you want is a money management technique that reduces your spending and moves you closer to your savings goals.
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