Becoming a smiley saver

The easiest way to start using the First Law of Gold, is to become a good saver. Develop your savings muscle! By consciously expecting to put money aside into savings, you'll see your account grow, you'll want to save, and you'll change how you see your money.

Here are some easy steps to develop the Habit of Saving, and then up to the Habit of 10% to start. 10% of your net incomes can be increased after you are a really good saver.

1. Setup a Savings Account, or a High Yield Savings Account (HYSA).

   • If you're unaware of a HYSA, check Nerdwallet to find out more.

   • There are many options, and these are Nerdwallet's Sept. 2024 picks. Do your research to see what is good for you.

   • The traditional route is to contact your bank, and have a standard Savings Account setup. Or request to set it up online.

2. Every time you get a paycheck or an income, make a transfer to your savings account or HYSA. Don't worry, it's not hard!

   • Contact your employer's HR department. They can normally split your paycheck into different accounts automatically.

   • Divert a set percentage of your paycheck to your Savings Account or HYSA.

   • If you can automatically make this transfer, your savings now grows every paycheck.

     • E.g., Put a recurring transfer from your checking account to your savings or HYSA on the same day you get paid. Then immediately you only have in your checking account your paycheck - the percentage saved.

   • Pro tip: To build the habit, it is actually good to do the transfer each time to your savings/HYSA manually. When you've made a habit of it, then you can automate the saving.

3. Build the habit of savings.

   • Start at 1% net of your paycheck, and build to 10% net of the paycheck.

   • Or, just go straight in at 10% per paycheck! If you can manage it, we would suggest jumping to living on 90% of your net income and savings 10%.

4. Don't touch the growing money.

   • This is sacred money that doesn't get to be spent on consumption.

     • This is for security, deposits e.g., rent or a house, or the 3 to 6-month emergency fund that covers living expenses.

   • Be firm and disciplined (you can do it!), even though you want to spend it for many desires and wants.

Initially, when developing the habit, the interest rate in the Savings Account or HYSA itself is not very important. Normally the amounts earned in interest are very small. For example, the U.S. average savings account interest rate in September 2024 was 0.46% Annual Percentage Yield (APY). If you put $10,000 in a Saving Account with a 0.46% APY, after 1 year of monthly compounding you would have $10,046.10 in the account (i.e., $46.10 of interest earned in a year!), and $10,232.62 in 5 years. Um yeah, not life-changing amounts. Of course if your HYSA pays 4.2% - 5%, then you'll earn a good deal more per year. Again, initially it's about building the Habit of Savings and the Habit of 10%. The compound interest calculator from Nerdwallet is used to highlight this example below. The information is provided for education purposes only.

Keep at it. You're on the path to becoming a Smiley Saver! By building the Savings Habit, Habit of 10% (and more when you're ready), your money starts really becoming yours and working for you.