Would you like to buy a car once you have a license? Saving money is how you get the more expensive things that you want. Are you aware of the expenses that come with owning a car? There’s a lot more to owning one than just driving it around and having fun. You need auto insurance, gas to drive, money set aside for maintenance (oil changes, new brakes and eventually new tires) and unexpected repairs.
You’ll most likely use your car to go out and do fun stuff with your friends. Going out to eat and to the movies can get expensive. Having a good savings plan sets money aside for all your hobbies and entertainment. It’s also great for expensive purchases you may want to make, like a new laptop or an iPhone.
How much should I save?
Most people decide how much they can save after their monthly expenses like rent, house payment, car payment, car insurance, cell phone bills and groceries, etc. The trick is to make savings as important as all those expenses.
So, pay yourself first – put away the amount you planned to save before you do anything else. Have the money automatically withdrawn from your paycheck and deposited into your savings account. Why? Most of us have money each month that we can’t track. We spend it somewhere! So, save it first!
Let’s say you plan to cut down on the amount of money you spend. You stop buying snacks from the vending machines at school and you take the time to pack lunch. Now you have an extra $10 in your pocket every week! That’s $40 a month! Put it in a high, yield savings account with an annual interest rate of 1.6%. In one year, you will have saved $480 and earned $44.83 in interest.
So just what is interest on a savings account and how does it work?
Interest is money the bank pays you so that they can use your money to fund loans for other people. There are two ways in which interest is calculated:
Simple interest is a percentage based on the amount of money you deposit. For example, if you deposit $100 at 2 percent interest paid semi-annually, you receive $2 twice a year for a total of $4 of interest earned each year.
Compound interest is more interesting. The bank starts out by paying you $2 based on the $100 you deposited; However, your next payout is based on the total amount you have accumulated, $102.
This may not seem like a huge increase, but, over time, compound interest is an easy and effective way for you to make money on your money.
Even if you only make minimum wage or don’t work but receive an allowance from your parents, you can begin saving and stacking your money for those big things you want to buy. We put together some cool saving tricks to help you get started!