With interest rates staying at all time lows, we may be tempted to look at saving as a no-win situation. Monies deposited just aren’t accumulating any interest and with an annual inflation rate around 2%, aren’t we actually losing money on our savings?

The short answer is yes, but a more prudent answer lies with the interest rate we pay on credit cards and loans. If we have no savings at all (or very little), an unexpected expense like a refrigerator breaking down ends up on our credit card. We end up paying interest on a credit card balance, and add yet another bill (or a higher bill) to our monthly cycle.

This is where we can win simply by having a little bit of emergency savings set aside. Saving just one dollar each day would accumulate $365.00 each year and over $3,000 in ten years. That is if we don’t use it for something.

There are many reasons why people don’t save. Here are a few with some counter-reasoning:

I try to save, but I forget (it’s inconvenient) to make deposits.

To eliminate this situation, we can set up an automatic transfer from our checking account or split the direct deposit from our employer so that a portion goes directly to savings. By making saving automatic we eliminate the need for us to remember deposits, and we can determine how long it will take to save a certain amount.

At 0.4% interest, it’s really not worth it.

If we save nothing, then we don’t have a safety net of cash available when an unexpected expense comes along. Without some amount of savings, a loan or credit card could be the only option when the car needs a major repair or the refrigerator breaks. This works directly against our goal to eliminate debt.

 Whenever I accumulate some savings, something comes up and I make a withdrawal.

This is start-and-stop saving, and there’s only one solution. Our savings needs to be the last resort when we need cash. Maybe we can put off a purchase or make what we have last a bit longer, but we’ll never accumulate savings if we allow ourselves to withdraw unless it is absolutely necessary.

Ten years to save $3,724.80, but I need to save much more!

It’s true that $3,700 really doesn’t go far these days when we consider our monthly bills, so let’s look at some other possibilities. Can we save $2.00 each day?

Daily Savings Rate             1 Year          5 Years          10 Years          20 Years

$2.00                                $733.31      $3,687.96       $7,448.38      $15,198.60

The average cable television bill is about $3.50 per day, so how about $3.57 each day which is about $25.00 weekly?

Weekly Savings Rate         1 Year          5 Years          10 Years          20 Years

$25.00                           $1,302.35      $6,564.13    $13,260.85      $27,062.79

When we hear sales promotions that say it will cost us pennies per day, or for $1.00 a day we can have this or that, the idea is to keep us thinking in small numbers. But those small numbers add up and become big numbers over time. It’s the same with our savings.

We don’t often consider the growth of saving a small amount, just like we don’t consider the cost over time of a small expense. In the calculations above, I assumed a regular bank account earning 0.4% interest. As our savings account grows, we would move at least a portion to accounts or investments that provide greater returns.

I could go on, but you get the idea. Saving a little can turn into a lot.

Thanks for reading.