Despite some hopeful signs such as encouraging job reports and a rising stock market, an increasing number of Americans are having difficulty saving to meet goals ranging from meeting emergencies to affording retirement.  Over the past three years, the number who spend less than their income and save the difference, are building home equity, have adequate emergency savings, and think they are saving enough for retirement has declined.  However, the survey also revealed that having a savings plan has beneficial financial effects, even for lower-income families.

The survey revealed that two-thirds of Americans, or 66 percent, spend less than their income and save the difference, and two-thirds “have sufficient emergency saving to pay for unexpected expenses like car repairs or a doctor’s visit.”  Yet, fewer than half, or 42 percent, say they have “a savings plan with specific goals,” and slightly more than half of the non-retired, or 52 percent, think they are “saving enough for a retirement in which [they] will have a desirable standard of living.”

I actually find some of this information to be encouraging.  According to this survey, over 60% of Americans actually spend less than they earn and also have some sort of emergency fund in place to pay for small, unexpected expenses.  Despite this, fewer than half feel they have a savings plan in place with specific goals in mind.  Wow – maybe we are actually learning from our mistakes of the past!   Many studies from a few years ago showed that our (America) savings rate was at or near zero.  Now, we have people saving money but still don’t feel like they have enough.  This is great news – well, maybe not for consumption and debt.

I know many are struggling right now and are having trouble making what they did even a few years ago.  Even though this is the case, many are now saving money for those small, unexpected emergencies.  I don’t know when the economy will improve (there are signs that it is starting to) but, if people continue to focus on their savings and less on consumption, imagine what kind of money they will be able to sock away once they start making more.  I know many lived up to their paycheck, and more, for years.  This practice is what helped many get into the financial mess they are in.  I know this was somewhat of a small survey but, if these beliefs are held by a majority of Americans, I feel very encouraged about our future.

What do you think about these survey results and the state of America’s savings?

The Ally Savings account is a high yield online savings account.  You may know that an online bank decreases its cost because it doesn’t have the same overhead as a typical brick and mortar bank. These overhead costs are then passed onto customers in the form of higher yields on savings accounts.

Background on Ally Bank

I did a little research on Ally to make sure it is a good option to consider.  Ally Bank is built on the foundation of GMAC financial services.  I appreciate how Ally openly states on their website they value integrity as much as deposits.  You don’t hear a statement like that often.  As a result, they are continually looking for ways to improve customer experience.  They have 24/7 customer service to make themselves available anytime you require assistance.

It’s quite obvious Ally appears to be focused on the customer and helping people increase their savings.  You can set up what they call sleeping money alerts.  When Ally sees that you could do more with your money to increase earnings, you can receive an email alert with savings suggestions.  Another great benefit is that you receive daily compounded interest.  This means you earn interest on your interest earnings each day!

I also found that you can open an account with $0.  This makes the process easy in that you can open an account immediately and can wait to deposit funds when you have them available.  There is no minimum balance and no monthly fees.  Also, your savings are FDIC insured.

Steps to Open an Ally Bank Savings Account

Setting up an Ally Savings Account only takes a few minutes.  All you need to do is enter some basic information and make a few decisions to complete the enrollment process.

Here is a brief run-down of the steps you’ll encounter:

• Determine the account ownership type.  In other words, you need to determine how many account owners you want to have for your account.
• Select the savings account type.
• Enter certain personal information required for opening the account.  You can also decide how you want statements delivered to you (email or mail).
• Decide how you will make your initial deposit.  You can mail in a check or transfer funds from your existing checking account.  If you decide you want to use your checking account you’ll enter the required information to transfer your initial deposit.
• Bingo, you’re done!  Log into your new account and start checking things out.

Quick Highlights of the Ally Bank Savings Account.

• Free online banking transactions
• No monthly fees.
• No minimum deposit
• Ally will not charge you a fee if your balance dips too low
• Customers are allowed six withdrawals or transfers per statement cycle.
• FDIC Insured

What do you think about this high yield savings account opportunity from Ally Bank?

Without an adequate “rainy day fund” or emergency savings, sudden job losses and declines in income forced many people deeper into a debt trend that has plagued America for years.  In fact, debt is just the opposite of savings according to Larry Burkett.

Saving is making provision for tomorrow, but debt is presumption upon tomorrow.

Savings can be a challenge because our culture encourages doing just the opposite.  In my recent post on contentment and peace I discussed how our culture encourages discontentment.

That’s right.  If we can be encouraged to be discontent with our current situation, we are more likely to spend on products and services that lead us further away from saving and many times deeper into the arms of debt.

Thankfully, there are some good Biblical principles we can surface from scripture that can help guide our way.

Save for a coming famine, or challenging times ahead

Just as Joseph saved during a time of plenty to prepare for a coming famine, we too must expect their will be challenging times ahead.  I don’t have to convince anyone of this since our economy is still in a state of recovery.

Let Pharaoh appoint commissioners over the land to take a fifth of the harvest of Egypt during the seven years of abundance. They should collect all the food of these good years that are coming and store up the grain under the authority of Pharaoh, to be kept in the cities for food.  This food should be held in reserve for the country, to be used during the seven years of famine that will come upon Egypt, so that the country may not be ruined by the famine (Genesis 41:34:36).

An example of wise saving

Scripture also tells us that Ants are good examples of creatures that actively save up or store for the future.

Four things on earth are small, yet they are extremely wise: Ants are creatures of little strength, yet they store up their food in the summer (Proverbs 30:24-25).

It’s interesting how we can learn wise principles from one of the smallest creatures on earth.  Yet, with Ants, saving seems to be built into their genetic structure.  We too must make saving become so common little thought has to be put into it.  It has to become a natural act of discipline in managing money.

It’s foolish to spend all we have

Scripture tells us that it’s simply foolish to spend all we have.  While we might be tempted or even encouraged to spend more and more, doing so limits the opportunity to prepare for the future.

In the house of the wise are stores of choice food and oil, but a foolish man devours all he has (Proverbs 21:20).

Do you ever feel like you devour or spend all you have?  At the end of the month, many individuals or families look at their checking account and realize there is nothing left for giving or saving.  One of the best ways we can overcome this issue is to pay ourselves after we give each month.  Once the money has been marked as savings and moved beyond immediate reach or access you are much less likely to spend it.

Do you face these common challenges in saving?

I don’t have enough money to save

I’m of the opinion that we need to plan like we’ll never receive another increase in income.  Just as debt is presuming on the future; you can presume you’ll have more money to save later.  The right giving, saving and spending mix has to be determined now and lifestyle must be adjusted accordingly.

Still, if you’re having trouble getting started, just focus on starting with a little bit.  If you’re goal is to save 10% of your paycheck, you might not be able to make changes to do so overnight.  But most people can make changes to get savings started.  Set a timeline in which you will increase savings and do the work to meet your goals.  For example, by April, I will increase my savings by X amount.

I spend my savings each month on common expenses

This is a common issue and it’s usually the result of not having a refined enough spending plan to capture all the necessary expenses for the month.  It can also be the result of not having enough of a barrier between you and your savings.

To combat this issue, make sure your spending plan or budget includes all the necessary spending categories.  You can learn more about budgeting by following a 3 step plan budgeting plan highlighted in my video post.

Creating barriers to savings involves getting your savings into another account.  Usually this account requires some thought and a little bit of work to get access to the money.  You’re much more likely to use it if it’s in your checking account.  To create these barriers set up automatic savings deposits as well as consider using a high yield online savings account.

What do you think about these Biblical principles to savings and how are you following them today?  Please share your tips and ideas with other readers.

Each of the posts from the Bible and Money series are based on principles discussed during Money Map Coaching sessions and the Money Map Coach participants’ guide.  You can learn more about Money Map Coaching at Crown Financial Ministries.  You can also visit my Money Map Coaching page.

Download this post.

Why you should save

When I think about saving there are a couple of Biblical scriptures that come to mind.  First, Proverbs 21:20 tells us: “the wise man saves for the future, but the foolish man spends whatever he gets.”  I don’t think this scripture tells us we shouldn’t spend, but it does plainly tell us that we shouldn’t spend all of our money without preparing for the future.  As mentioned, it’s important to find the right balance and make sure savings is a permanent category in the monthly budget.

Also, Proverbs 30:24-25 (NIV) tells us:  “Four things on earth are small, yet they are extremely wise:  ants are creatures of little strength, yet they store up their food in the summer.”  We all know that ants store up their food for future use.  This example illustrates that saving is wise and it protects us in the future.

Types of saving

There are two basic types of savings.  Short-terms savings, which I discuss in this post, are savings in which we’ll need in the near future.  This type of savings includes an emergency fund, savings for replacement of items such as automobiles and appliances and entertainment items such as the family vacation (ideally saved after more important areas are covered).   Most financial gurus recommend saving 3-6 months of short-terms savings in case of job loss or for an unplanned expense such as medical or automobiles.

Long term savings includes a couple of different areas.  First, long-terms savings is investing money for the latter years in life, commonly referred to as retirement.  This savings includes investing money in your company 401k, IRA or other retirement account.

The other type of long-terms savings is investing to build wealth.  At a future point along the financial freedom journey, once we are saving for retirement and children’s education, we can further invest to build wealth.  This may include investing in mutual funds, company stock, real estate, etc.

When should you save?

There is an opportunity to begin saving immediately.  In fact, both Dave Ramsey and Crown Financial Ministries recommend saving $1000 in short-terms savings to begin an emergency fund before paying off debt.  Many people immediately think they should focus on paying off debt, but in reality, emergency savings is important to have because when an unexpected emergency occurs, it could drive you deeper into debt if you don’t have the money to cover the expense.

I think what is often not as clear is when you should begin saving for replacement items such as automobiles and appliances.  Both of these things can be considered major expenses and without adequate savings we may fall into the temptation of using credit or a loan to purchase them.

I think the Crown Money Map provides a clear plan for when to start this type of short-terms savings.  Once all consumer debt is paid off and one month’s living expenses have been placed into an emergency savings account, it is appropriate to start saving for such items.

Giving before savings – an important message

Before we go further, an often area considered after savings is giving.  Giving for a Christian should be the first step on the plan to financial freedom.  If we are saving before giving, our focus is on fulfilling our purpose for money rather than God’s purpose.

How much should you save?

If you look at the percentage guides from Crown Financial Ministries, you’ll see that short-terms savings should be around 5% of your monthly budget.   Yes, I mentioned short-term savings because investing, or long-term savings is a separate budget category.

I think this percentage may be more if you’re in the early phases of your journey because you will be trying to build your emergency savings as quickly as possible.

Then, much of this short-terms savings could be used for investing, or long-term savings.  Note:  a short-terms savings category in the budget will always need to remain because you will continue to save for replacement items and eventually entertainment such as a family vacation.

Tips for saving

It’s a good idea to set up an automatic deposit into a savings account so that savings is automatically deducted from your paycheck or transferred from your checking account each time you’re paid.  You can typically work with your HR department to split your paycheck for deposit into multiple accounts.

Ideally, short-terms savings should never be considered for anything outside of its designated purpose in the monthly budget.  Otherwise, there is temptation to use the money.  And believe me, you can always find a need for it.  The automatic deposit into the savings account helps avoid this temptation.

Try to get the short-terms savings into an account that isn’t easily accessible.  For example, you may want to choose a savings account at different institution than your regular checking account.

Internet high yield savings accounts such as ING Direct, Ally Bank, WTDirect or HSBC Direct are all good options to consider.  They each require a few business days to transfer money to a checking account with another financial institution.  This is a decent barrier to keep you from easily digging into savings and spending it during the month.

How have you been successful in planning for the future with short-term savings?

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As a reminder, a high yield savings account is an account that offers a much more competitive interest rate than a traditional savings account.  Many of these options are online or internet banks which save typical break and mortar costs and pass along the savings in high yield rates to customers.  High yield savings rates are variable which means they can change any time.  But overall, they provide a great option for the type of savings that needs to be easily accessible when you need it.

WTDirect is an online option within the Wilmington Trust family of companies.  Wilmington Trust companies are headquartered in Wilmington, Delaware and have over 100 year of history according to their website.

WT Direct interest rate

Currently, they have a competitive interest rate of 1.51 % for accounts $10,000 +.  After opening an account you have 60 days to increase your balance to at least $10,000.  You will still earn 1.51% in the first 60 days as long as you have $1 in the account.  Interest is compounded daily and is credited to your account monthly.

WT Direct customer service

While browsing the WTDirect website, I noticed they make themselves readily available to customers.  They  provide customer service 7 days a week.  They also have three options available in which to check your balance.  You can speak to someone in customer service, use touch-tone banking, or log into your account online.

WT Direct savings account features

• No hidden restrictions:  No fees, no minimum deposit to open the account, no checking account required in order to get the high rate.
• Your money is insured up to the maximum allowable by law which is $250,000.
• No limits on the number of deposits per month and no minimum balance fees.
• Transfers are limited to $500,000  per month.
• Transferring between accounts with other financial institutions looks to be straight forward and takes 3-5 business days.
• You can have as many linked accounts as you want.
• Set up email alerts to manage balances.
• Online savings guides provide tips and more information about onlines savings accounts.
• Direct deposits from your paycheck.

Enrollment

Enrolling is straightforward and easy.  Complete the information request and provide the funding bank account information.  Trial deposits will be made into your external account.  Once you verify these deposits (it takes a few business days) you’re up and running.

Click here to open a WTDirect Savings Account.

Do you have a WTDirect Savings Account?  If so, please share your experience in the comments.

If you’re just joining, this is article #4 in a series about The Baby Steps and Money Map. I invite you to follow along with me as I walk you through both approaches, discuss my observations, hopefully, stimulate your thinking and raise some questions. I’ll round out the series with some summary thoughts.

Baby Step 4 – Money Map Destination 4

What does the Baby Step say?

• Invest 15% of income into Roth IRAs and pre-tax retirement plans.

What does the Money Map say?

• Begin savings for major purchases (home, auto, etc.)
• Begin saving for retirement.
• Begin saving for children’s education.
• If you want to start your won business begin saving for it.

Observations and Questions

• We see some key differences between Destination 4 and Baby Step 4.  The Baby Steps are more specific on what amount should be contributed to retirement.
• The Money Map recommends savings across four areas including retirement.  Note:  Baby Step 5 is college funding.
• I think it’s important to have a plan to save for major purchases beyond retirement and children’s education.  Once the emergency savings is fully funded (after debt is paid off) it’s important to create a car savings each month.  Otherwise, when the need for a car presents itself, one will be forced to go back into debt.  It’s also important to have seperate savings contributations for a home if that hasn’t already been purchased.
• The Money Map scripture in this phase is Proverbs 21:5.  “Steady plodding brings prosperity.”

What are your thoughts on this phase?  Do you think the Baby Steps left out important areas of savings, or were they meant to be high level and convered in Dave’s book, The Total Money Makeover: A Proven Plan for Financial Fitness.

Photo by Ann Cleaver.