How to Start Saving Money

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No matter what you want to achieve with your money, the first step is almost always to start saving.

In this step-by-step guide, I’ll show you the best way to start saving money and hopefully empower with the tools and skillset needed for you to reach whatever financial aspirations you may have for the future.

I’ll take you through the importance of setting financial goals, before showing you some of the best strategies and different financial products available on the market that are designed to help you save money.

The 5 steps to saving money

  1. Work out what you want to achieve. It may seem obvious but the first step in any savings strategy is to set out your financial goals. That way, your savings have a clear purpose, which helps ensure your focus and ensuring that you stick to your plan.
  2. Create a budget. Once you have defined what your goals are, you need to start thinking about how much money you’ll actually have available to save. To do this, create a budget and list what your income and expenditures are and this way you can establish what the amount you can save actually is. It’s also a useful exercise as it helps you take control of your finances.
  3. Research strategies and products that can help you. Using this savings figure, you can start looking at the strategies, products, and apps available to you that can allow you to give your savings a boost.
  4. Start saving. Finally, you can put these into action and start saving towards your goals.
  5. Paying off interest early. To save money on interest, you might want to consolidate or pay off early any poor credit loans, or bad credit card finance for example.

Establish your savings goals

Having a savings goal is key when it comes to saving money, defining your goals should be the first step you make when you start saving. After all, if you don’t know what you’re saving for, then it can be much harder to do it and the temptation to dip into your savings is that much greater.

Setting goals like this can narrow your focus, further motivating you to stick to your habits and strategies.

In general, your goals can be divided into three categories: short-, medium-, and long-term goals.

Short-term goals

A short-term saving goal is anything that will take less than a year to complete.

It could be something such as clearing credit card debt or building up an emergency fund.

Medium-term goals

Your medium-term goals will typically take between one and five years to complete.

These could include building enough savings so that you can apply for a mortgage or even put a down payment on a house.

It could also include other moderately expensive targets, such as buying a car or saving for a dream holiday.

Long-term goals

Finally, your long-term goals include anything that will take five years or more.

For example, a common long-term savings goal for many people is retirement.

It may seem premature for you to be thinking about long-term goals such as retirement, especially if you’re still in your 20s or 30s.

But actually, the earlier you work out what you want to achieve and how much you’ll need to do it, the sooner you can start putting plans in place to get there.

Creating a budget

Once you know what you want to achieve, the next thing you need to do if you want to start saving money is to create a budget.

A budget can give you a visual tool that shows you exactly how much comes into your household each month and, crucially, where it goes.

List your income

First, make a list of all your income. Add together your monthly salary – including a rough average of any bonuses you may receive each month – to any interest received on savings you possibly have, and any investment returns you already generate.

Combined, this figure is how much you’ll typically have to work with each month.

Calculate and subtract your expenses

Next, you need to work out how much you spend on a monthly basis. This needs to include living expenses and monthly bills, including utility bills and student loans, as well as a rough estimate of your monthly credit card debt.

You should also include any other monthly expenses that you have, such as streaming services or gym memberships.

Take this figure and subtract it from your total income. This should give you the amount that you have left over for saving at the end of the month.

Divide your expenses into “needs” and “wants”

At this stage, it can be useful to divide your expenses into “needs” and “wants”.

For example, you need to pay your electric bill, but you also want a Netflix subscription. If you can’t afford both, you should be prioritizing needs over wants.

Doing this can also help you to see where you have expenses that you don’t really need. For example, you may have a gym membership that you simply don’t make the most of each month.

Cutting these expenses could help you reach your savings goals that much faster.

Having an emergency fund

As part of your budget, you should remember to build an emergency fund for those unexpected costs or events that can have an adverse impact on your finances and life.

For example, if your car broke down and you needed to fix it, or you suddenly lost your job and your income dropped, you could rely on this fund to tie you over in the short term.

Estimates vary for how much you need to have in your emergency fund, but a good benchmark is often three to six months’ worth of expenses. That way, you’ll be covered for a fairly significant period of time in case of an emergency.

This money should be held in an easy-access savings account so that you can get to it quickly if you ever need to.

3 easy ways to save money

Once you’ve got your budget in place and you know how much you have to hand, you can start looking at your available ways to save money.

Saving strategies can be an effective and easy way to do this, especially if you manage to create a routine and stick to your saving habits.

Here are three saving strategies that you could try.

1. The 50/30/20 rule

Popularized in senior US senator Elizabeth Warren’s book, All Your Worth: The Ultimate Lifetime Money Plan, the 50/30/20 rule can help you to save by changing your financial behavior.

What is the 50/30/20 rule?

The key to the 50/30/20 rule is in the name. It simply refers to dividing your income by percentages and then spending and saving it accordingly.

Specifically, this division means you do the following:

  • Spend 50% of your income on your “needs”, including household bills and other essentials.
  • Spend 30% of your income on your “wants”, including expenses such as online shopping or going to the cinema.
  • Save 20% of your income directly into your bank account each month.

How can it help me?

The 50/30/20 strategy is useful because it ensures your essentials are paid for and creates a regular savings habit, while still giving you a fun budget so that saving doesn’t feel like a chore.

Crucially, this fun budget has a spending limit. This hard stop point can help to scratch the itch of wanting to buy and do things, while simultaneously preventing you from going overboard.

A fixed saving habit like this can be especially useful if you have a tendency to compulsively spend your money.

2. The “penny-a-day” system

The “penny-a-day” system became popular a few years ago when it went viral on social media.

If you often find yourself with extra cash or loose change lying around, then this could be a good strategy for you.

How does the “penny-a-day” system work?

The penny-a-day system is remarkably simple. All it involves is saving pennies each day with an equivalent value to the day of the year.

So, on 1 January, you’ll put one penny in a jar; on 2 January, you’ll put two pence in; on 3 January you’ll put three pence in, and so on.

This may not sound like much, but on the 100th day of the year, you’ll be saving $1, with $3.65 going in on 31 December.

How can it help me?

You’d be surprised how much you can save just by using this strategy.

In a year, using this strategy would see you actively save $667.95 into your pot. While this isn’t a life-changing sum, it’s still a fairly healthy amount saved without much effort.

Of course, if you used this strategy over many years, it could provide you with significant savings by the end.

3. The 30-day rule

The 30-day rule is less of a savings strategy and more of an “anti-spending” strategy.

What is the 30-day rule?

The 30-day rule comes into effect whenever you want to buy something.

If you’re considering buying something or you’ve spotted an ad online that’s piqued your interest, take 30 days before you make your purchase.

By taking this step back you’ll give yourself the time to decide whether you really want to buy the item in question. If after those 30 days you’re still sure you want to pull the trigger and splash out on yourself, then by all means go ahead.

But, if after those 30 days you realize you don’t really need it or you wouldn’t get that much use out of it, then simply cross it off your list.

This space between purchases can be invaluable in helping you to decide what you think you want, and what you actually want.

How can it help me?

When it’s working at its best, the 30-day rule can help you to entirely eliminate all your unnecessary shopping and spending. This can make a huge difference to your financial situation, particularly if you manage to do this over a long period of time.

The best thing about the 30-day rule compared to other saving strategies is that there’s theoretically no limit to how much money doing this can save you.

At its best, the 30-day rule is a great tool to help you manage your purchases and by practicing financial restraint you can help your savings grow.

What financial products could you consider?

Alongside these saving strategies, you could also consider the range of financial products on the market that can help you make the most of your money.

High-yield savings accounts

While it’s good to use easy-access savings accounts for your everyday expenses, a high-yield savings account can be a good choice for those wanting to grow their savings in the long term.

High-yield will offer significantly better interest rates, in comparison to traditional savings accounts, meaning you will get higher returns on the money that you invest into this account.

The downside to this is that you may have to lock your money away for a certain period, with many providers limiting access to these funds. This means it’s important to not put any money you need for living your daily life into this account.

Depending on the financial institution you save with, you may also be able to find other benefits that come with the account, such as a cashback scheme.

Whether you decide to go with a bank, building society, or even an online bank, it can often be sensible to search across the market to find an account with the right details for you.


IRAs are a popular savings product in the US, allowing you to hold and grow your money tax-efficiently.

IRAs have a limit on how much you can put into them each tax year. For 2023, this limit is $6,500 ($7,500 if you’re age 50 or older).

Crucially, contributions made into a traditional IRA are tax-deferred and as such is a great way of reducing your current tax burden.

There are various different types of IRA accounts:

Traditional IRA

In a traditional IRA, contributions are tax-deductible. You pay no taxes on IRA earnings until retirement when withdrawals are taxed as income.

Roth IRA

Contributions are made with after-tax funds and are not tax-deductible, but earnings and withdrawals are tax-free.


A Simplified Employee Pension Plan IRA allows an employer, typically a small business or self-employed individual, to make retirement plan contributions into a traditional IRA established in the employee’s name.


Is available to small businesses that do not have any other retirement savings plan. The SIMPLE – which stands for Savings Incentive Match Plan for Employees – IRA allows employer and employee contributions, similar to a 401(k) plan, but with simpler, less costly administration, and lower contribution limits.


If you have an emergency budget all sorted and you want to try and turn your savings into more money, then you could consider investing in the stock market.

By buying and selling investments, you can potentially see your money rise in value, giving your savings a boost.

If you want to find out how to start investing, my guide to investing for beginners may be of help to you.

The key thing to remember with investing is that there’s a possibility that you’ll lose money, as well as make gains. This means your money is at risk.

Never invest money that you need for living your daily life or paying essential bills, and only invest money that you can afford to lose entirely.

Have you considered savings apps and websites?

Outside of using strategies and products to help manage your spending, you could also look at the various apps and websites that have been specifically designed to help you save money. is one of the best websites for saving money in the US, combining tips, deals, and practical ways for you to make the most of your money.

For example, Clark has information on the best insurance providers, as well as a host of other practical advice and reviews designed to help you maximize your finances.

Similarly, the site contains plenty of information on how to get a better deal on everything from cell phones to streaming TV providers.

You can also access podcasts and sign-up for their newsletter. This newsletter is packed full of tips and the latest deals that, when combined, could see you save big bucks.


Cleo is an innovative app that connects directly to your main current account and then provides analysis and insights into your spending habits.

One of Cleo’s best features is that it allows you to create budgets. This can be useful in combination with a strategy such as the 50/30/20 saving strategy.


Mint is a free web-based personal financial management service that helps you with a full analysis of your finances when you link it up to your bank account.

From identifying areas where you’re overspending to finding old subscriptions that take your money without you using them, you can use the data Mint provides to clean up your budget and improve your savings.


Digit is a streamlined and easy-to-use saving and investing tool.

Digit calculates how much you can save and then transfers the money that you can invest into an FDIC-insured account.

This can help to turn a bit of your spending into savings. You can then invest or save this money in a variety of accounts.


Acorns is an investing app that rounds up your purchases to the nearest dollar and adds the difference to an Acorns investment account.

Acorns is a great way for you to start saving and lets savers quickly turn those nickels and dimes into meaningful savings.

How can I quickly save $1,000?

If you want to quickly save $1,000, the answer will likely be in a combination of the strategies above.

Start with your budget and then work from there, cutting out spending as you go. Then in the meantime, consider adding strategies and products that help you to reach your targets.

The key is not to get disheartened at the first few hurdles of saving. Give your strategies at least six months, potentially even up to a year, so that you can really see the impact of changing your behaviors.

From there, you can assess how successful they’ve been and then start making changes to improve your situation even further.

Taking financial advice

If you’re still unsure of the most appropriate strategies and products to use to help you save money in your personal circumstances, or you want to save money quickly but you’re not sure how to do so, you could consider working with a financial advisor.

A financial advisor can help you to work out your financial goals and then find the right strategies and products to help you achieve them.

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