If you’re looking to grow your savings in 2024, it can be hard to know where to begin. Many people feel like they can’t “afford” to save after paying their bills, or don’t know how to save money efficiently.
Based on research in behavioral economics and expert advice from investors and financial advisors, we’ve compiled a few expert-recommended strategies to grow your savings.
1. Make saving automatic
Sometimes the hardest part of saving money is deciding to save. People get paralyzed by decisions, and saving money can be one of the hardest. “How much should I save? When should I move the money into my savings account — on the first of the month, on every payday, or at the end of the month so all my bills are paid??” Before you know it, you’re suffering from indecision and dread, and end up not saving any money at all!
To overcome this analysis paralysis, you need to make saving automatic. Debt payoff apps like Oportun and Qapital can help you automate your savings and pay off debt faster. Some banks, like Ally, also offer automated savings tools that analyze your spending patterns and move money from your checking account to your savings account, without you having to worry about it.
2. Save for specific financial goals
Sometimes, saving money for a specific goal — and visualizing that goal — can help you make more progress. If you want to go on vacation, don’t just put money into a general savings account. Instead, open a special savings account dedicated to that vacation goal, and name the account after the Hawaiian beach resort where you want to stay.
Some banks have started to make it easier to save for specific goals, even without opening a new bank account.
Ally Bank
Ally offers “savings buckets,” which are like digital envelopes within your savings account where you can stash money for specific goals like a vacation, a new car, a kitchen renovation, and more.
SoFi Bank
The SoFi Checking and Savings account lets you make automatic deposits from every paycheck into specific savings “Vaults” dedicated to up to 20 different financial goals of your choice.
Saving for specific goals, and watching your progress, can feel inspiring and energizing, and can give you the motivation to keep saving more.
3. Turn saving into stress relief
Have you heard of retail therapy? All too often, people feel like the best way to blow off steam or reward themselves for a tough week at work is to go out and spend a bunch of money they don’t have. What if you could flip that around and turn saving money into a form of stress relief?
Perry Wright, a behavioral researcher at Duke University, told CNBC that the decision to save money can provide the same therapeutic benefits as spending money. “It is the act of making a decision — not the receipt of the purchase — that provides a measure of control and delivers that temporary relief,” Wright said.
Remember how good it feels to pay off a credit card, or make the last payment on an auto loan, or put a big year-end contribution into your IRA account? Saving money and making big progress toward your financial goals can feel just as good as spending — or even better.
4. Keep your short-term savings in a high-yield savings account or CD
Once you’ve started to save some cash, you might be eager to make your savings grow faster. You’re probably thinking, “I work hard for this money, so why can’t this money work harder for me?” But if you’re still building up your emergency fund, you should tap the brakes on aggressive investment plans.
If you don’t have much spare cash, it can be too risky to put it into volatile investments like stocks. For example, the median American savings account balance, as of July 2023, was $1,200. What would you do if you invested that cash in a stock that suddenly went down by 30% or 40%?
Avoiding investment risk is a good reason to keep your emergency fund in a high-yield savings account. This gives you FDIC insurance and flexible access to your cash, and as of Jan. 25, 2024, the best accounts were paying over 5.00% APY. Another option for short-term savings is a certificate of deposit (CD). But CDs require you to commit your money for a specific period of time — watch out for early withdrawal penalties.
5. Invest your long-term savings in a diversified portfolio of stocks
If you’re saving for retirement or other long-term goals, even the best CDs and savings accounts won’t deliver the return on investment you need. For expert advice on retirement investments, we turn to the words of Warren Buffett, a legendary investor, CEO of Berkshire Hathaway, and the “Oracle of Omaha.”
In a 2017 interview with CNBC, Warren Buffett recommended that individual investors save for retirement by consistently buying S&P 500 index funds. This investment strategy lets you buy lots of companies’ stocks all at once, at a low cost. And just keep buying stocks, year after year, no matter what’s happening in the global economy.
“The trick is not to pick the right company, the trick is to essentially buy all the big companies through the S&P 500 and to do it consistently and to do it in a very, very low cost way,” Buffett said.
Bottom line: If you want to save more money, it starts by putting your savings on autopilot. Automated saving can relieve the stress of decision-making and help you reach specific financial goals. Short-term savings should go in the bank, and long-term savings can be invested in stocks. Some of the best banks are getting creative at helping people put their savings on autopilot.