Saving 101: A Beginner Guide

Whether you're saving for a new gadget, university, or just want to see your moolah grow, understanding how to save is important! In this guide, we'll explore easy and practical ways to save money fast, offering personal finance tips and money-saving hacks designed just for you.

What will I learn?

• Understand what a saving is and how it’s important.

• Know the benefits of saving.

• Learn how to save.

What is saving? 

Saving means putting aside some of your money for the future.

Think of your money as a box of your favourite chocolates. You could indulge in all of them at once, but then they'd be gone. Now, imagine setting aside a few of those chocolates. Later, when you're craving a sweet treat or facing an unexpected chocolate emergency, you'll be relieved that you have some left. It's like giving your future self a delightful gift. 

Saving is important for achieving your goals and handling unexpected situations - enjoying some of your chocolates (money) today while also reserving some for times when you'll truly appreciate it.Why is budgeting important?

Why is saving important?

Saving is essential because it allows you to be prepared for unexpected expenses, like medical bills or car repairs. 

For young adults getting jobs, it’s really important to have savings for unexpected stuff like losing a job or getting sick. Savings act like a safety net. 

Right now, only about 3 out of 10 people in New Zealand feel good about their retirement savings. That's why it's key for young people to start saving early. Having savings means if something bad happens, they won't have to borrow loads of money and can still pay for cool stuff they dream about, like traveling or buying a house. 

Plus, saving regularly means their money grows more thanks to something called compound interest. By saving consistently, young kiwi can take charge of their money and build a future they're excited about.

Benefits of saving

Starting to save is a key step towards a secure financial future and a life of opportunity.

It's not just about putting money aside; it's about building strength, opening doors, and moving forward with confidence. When you decide to save, you're taking charge of your finances.

This readiness isn't just for life's challenges; it's about grabbing opportunities and making dreams come true. Saving is fundamental to a sound financial lifestyle. It eases stress and brings a sense of safety that touches every part of your life.

1. Emergency Cushion for the Unexpected. 

Saving money is like building a protective wall around your financial well-being. It prepares you for life's unexpected twists and turns, like sudden car repairs or medical emergencies, ensuring you can handle these surprises without derailing your financial stability.

2. Freedom to Pursue Dreams and Opportunities.

Think of your savings as a launchpad for your aspirations. Whether it's furthering your education, starting your own business, or taking a once-in-a-lifetime trip, having money set aside opens the door to exciting possibilities without the burden of financial strain.

3. Reduced Reliance on Debt. 

Saving money helps you steer clear of the debt trap. When you have funds tucked away, you're less likely to rely on credit cards or loans for your purchases or needs. This means you avoid paying extra in interest, keeping more money in your pocket and fostering financial independence.

How to Start Saving

1. Set Your Savings Goals

Begin by identifying what you're saving for. This could be short-term goals like buying a new phone or long-term goals like saving for an OE, a car or for uni. Having clear goals gives you a dollar figure to work towards and can help keep you motivated. 

Example: Imagine you're setting your sights on a new phone that costs $800, planning an exciting overseas experience (OE) next year that'll cost around $3,000, and eyeing an updated car for $5,000 to make commuting to university or work a breeze.

👉 Short-Term Goal: Saving for the smartphone means setting aside $67 each month if you want it in your hands within 12 months.

👉 Mid-Term Goal: For the OE, if you're giving yourself a year to save up, you'd need to save $250 monthly.

👉 Long-Term Goal: Aiming for the car in two years? That requires saving about $208 per month.

Setting multiple savings goals may be intimidating, so be sure to break each one down, understand what it is you want and how long it may take to save. To get on track, be sure to prioritise each goal. Maybe just focus on one goal and then introduce another when you feel you’re well on your way.

2. Create a Budget

Track your income and expenses to understand where your money goes. This involves listing all your sources of income and then subtracting your expenses, including bills, food, entertainment, and other necessities. The difference is what you can potentially save. Tools like budgeting apps or spreadsheets can be very helpful for this.

Read our Budgeting 101 guide to learn more about what a budget is and how to create one.

3. Open a Savings Account

If you don’t already have one, open a dedicated savings account. Savings accounts are where you can store your hard kept savings. Look for one with high interest rates and low fees as they can help your money grow while it sits idle. This account should be separate from your everyday account to reduce the temptation to dip into your savings. If you keep your savings in an account that you frequently spend from or have easy access to, you’re more likely to dip into your savings.

4. Make Saving a Habit

Treat saving like a regular expense. Set up a direct deposit to your savings account each time you get paid. Even small amounts add up over time. Try to increase the amount you save gradually as your income grows or you find ways to reduce your expenses. Eventually, saving so consistently will become a habit, like brushing your teeth before bed.

Example: Begin by saving $25 from each paycheck. It might just be the cost of a few coffees or a big lunch. As this becomes part of your routine, try upping it to $50. Over time, these amounts will build up significantly, turning saving into a second nature, just like your nightly toothbrushing ritual.

Learn to save from others 

Not everyone approaches saving the same way so here are some more examples showing how others save their money. 

Emily: The Part-Time Earner & Automated Saver

Emily is a university student working part-time with a variable income. To manage her savings, she uses the ASB banking app that rounds up her purchases to the nearest dollar and automatically transfers the difference into her savings account. For instance, if she buys a coffee for $3.50, the app rounds up the cost to $4, and the 50 cents difference goes to her savings. This method allows Emily to save little amounts frequently, which adds up over time despite her inconsistent income. Check with your bank if they offer something similar!

John: The Goal Orientated Full-Time Earner

John, a full-time IT professional, has a steady monthly income. He's saving for a family vacation. John calculates the total cost of the trip and divides it by the number of months until the trip. He opens a separate savings account specifically for this goal and transfers the calculated amount from his salary to this account each month. This dedicated account keeps him from accidentally spending his vacation savings and makes it easier to track his progress.

Cassie & Tommy: The Parent-Child Team & Frugal Saving

Lisa, a single mother, wants to teach her 10-year-old son, Tommy, the value of money and saving. They start a 'save-as-you-go' challenge where they put all the loose change from daily purchases into a jar. They also look for small ways to save money, like using coupons, buying items on sale, and turning off lights when not in use. Every month, they count the money together and deposit it into Tommy’s junior savings account. This approach not only helps them save but also involves Tommy in the process, teaching him valuable money-saving habits.

Looking for ways to introduce your child to money? Check out our free printable resources such as word searches and crosswords.

Conclusion

As we wrap up our journey through the essentials of Saving 101, it's clear that saving isn't just about stashing away cash; it's about building a secure, empowered future. Understanding the significance of saving, from emergency cushions to realising dreams, showcases its pivotal role in our financial well-being. By setting clear, achievable goals, we transform saving from a daunting task into an exciting adventure towards our aspirations.

Starting with a well-structured budget gives us the clarity and control needed to navigate our finances effectively. And with the right tools, such as a dedicated savings account and smart budgeting strategies, we lay the groundwork for a habit that can flourish into a lifelong practice. The act of saving becomes not just a routine but a stepping stone to financial freedom and peace of mind.

So, take that first step today. Whether it's setting aside a small portion of your allowance or paycheck, every penny saved is a penny earned towards a brighter, more secure future. Let's embrace saving with open arms, recognising its power to transform our lives, one dollar at a time. After all, the journey of a thousand miles begins with a single step — or in this case, a single saved dollar. Start small, dream big, and watch as your savings unlock the doors to endless possibilities