How to Start Saving Money: A Guide for Beginners

October 3, 2016
If you're ready to start saving money and get serious about your money, this guide is for you. Learn how to start saving money and stop being broke.
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Folks ask me all the time, “How can I start saving money with all of these bills?” and I completely get where they are coming from. One thing many of them fail to realize though is that there is only one important thing they need to focus on. 

That one thing they need to work on is simply developing the habit of saving money! It doesn’t matter how much or how little is being saved, to become a successful saver – you just have to start and be consistent with it. 

Saving money is something many Americans struggle with because they haven’t trained themselves to do it. So it’s not surprising that in this study, a third of those surveyed indicated they had absolutely no savings at all.

Just about everything costs money and if you were out of a job, you would face some tough decisions if you didn’t have any cash on hand. A car accident could put you out of work — and even worst, the loss of a loved one can set a family back financially. If you don’t have money saved, you may end up depending on debt to see you through medical emergencies, loss of job, or loss of a loved one.

Fortunately, there are many things you can do starting today to prepare for the rainy days that will inevitably come. It’s not easy building cash savings when all you’re focused on is how much you don’t have and how much you need. However, it can’t be any worse than giving away more of your future income to interest payments because you failed to prepare for things you know you need anyway.

In this article, we’ll discuss how much you should save, ways to create a solid savings plan, and savings vehicles you can use to keep your money safe for life’s mishaps, retirements, kid’s college costs and even life’s little pleasures.  

So without further delay, let’s talk about how to start saving money.


If you're ready to start saving money and get serious about your money, this guide is for you. Learn how to start saving money and stop being broke.


How Much Money Should You Save?

Many folks struggle to get that first $1,000 put aside for savings. This is the bare minimum that financial guru, Dave Ramsey recommends those in debt save before aggressively paying off debt. However, I don’t feel comfortable having just $1,000 in the bank because let’s be real  $1,000 feels more like a dollar during a true emergency.

Imagine having $1,000 in the bank, a mortgage, and student loan debt. You make enough money to barely make the minimum payment on your student loan payment while paying your mortgage and other bills.

Now, imagine that situation and then all of a sudden losing your job.

Without a job, you won’t be able to pay your student loans or mortgage and what about health insurance? If you have a medical emergency after losing your job, you would probably only have enough for your medical deductible. Add in the co-insurance and that $1,000 is gone in no time.

You see where I’m going with this?

My goal is to at least set aside three months worth of bare minimum expenses before completely throwing everything at my debt. That number feels more comfortable to me if I were to lose my job.

Plus, if I did get laid off, I could put my student loans in economic hardship deferment so I would be able to stretch my emergency savings a little longer until I find a job. Essentially, the point I’m making here is this do what helps you sleep at night!

Your savings goals may vary depending on your individual family needs and your sanity. Take the expert advice with a grain of salt and put away the amount that works for you and remember saving something is better than not saving at all. It’s all about establishing a habit of saving, remember?


How to Create Your Savings Plan

1) Decide what’s important to you.

Priorities. We all need them. Without them, we are aimlessly shooting for the stars and we really fail to achieve anything. If you’re saving for life, you’re simply doing it wrong.

Your savings should be a reflection of your values. What things are more important to you? Once you know these things, you have to prioritize them in the order of those you are most likely to achieve within the desired timeframe.

If you want a house, should you be out at Target every other week buying new pillows, throw rugs, and duvets for your 2 bedroom apartment? I think not.

If you want to send your kid to college with the least amount of debt possible, should you be throwing money down the drain to purchase them every new iPhone that hits the market? Nope and don’t let those little heartbeats of yours convince you otherwise either.


Related Reasons: The Real Reason You’re Broke


2) Divide and conquer.

List your goals on paper and prioritize them from most important to least important.  Label each as a short-term goal (something you can save up for within 6 to 12 months) and long-term (12 or more months).

Once you’ve done this, you should be able to see clearly what needs to go and what doesn’t. You can buy and do anything you want, but remember, it’s likely you can’t purchase and do everything.

For example, let’s say this was your of things you would like to do or pay for:

  1. Down payment for a rental property
  2. 529 account for little miss and baby boy
  3. A trip to Paris
  4. Retire at 45
  5. An outdoor entertainment space

Basically, you would need to prioritize these goals and determine whether they are a short-term or long-term goal. Depending on how important some of these are to you, you might be willing to give up on that outdoor entertainment space if it means you could save up for a rental property  (which in turn will provide you with passive income during your early retirement).

See how giving up some goals can help you achieve many of your other goals? You just need to figure out what’s important to you and stick with your plan to reap the benefits.


Related Reading: How to Have a Life and a Budget


3) Next, determine your strategy.

To determine your strategy, you need to add up how much money you should save to achieve each of the goals you decide to keep on your list.

Using the example above, let’s say this person decides to keep the following on their list.

  1. Retire at 45
  2. Down payment for a rental property
  3. 529 accounts for kids
  4. Trip to Paris
  • This individual wants to put a hefty down payment on their rental property with the hopes of having it paid off before age 45. This will provide them with another stream of income during their early retirement.
  • Still, to retire, they would need to have a decent amount of cash set aside to do so. The number they need to save would vary depending on their age, and they should use the advice of a professional advisor or online tools to come up with this number.
  • This person has to work through each goal and determine the costs. Based on the amount of time they have to save for their goal, this will help them determine the final number they should work towards.

Once they know this number, it’s all about making sure they treat their savings as a bill to themselves and consistently set aside the reasonable amount of money each month that will help them achieve their savings goals.

That’s easier said than it is done, however. If their income doesn’t allow, they would need to think of additional ways to make more money, eliminate expenses, or possibly consider creating a new strategy that eliminates some goals and extend their savings timeframe.


Related Reading: 

80+ Ways to Make More Money

How to Be More Frugal and Increase Savings


Here are a few different savings techniques you can try once you’ve created your savings plan.

  1. Save 10 percent. You can save 10 percent until you’ve reached your desired emergency fund savings. Then once this goal is reached, divide up the 10 percent of your other savings goals that we’ll discuss next.
  2. Use the 50-30-20 budget. Essentially, you would use 50 percent towards essentials, 30 percent towards debt, and 20 percent towards all savings (retirement, vacation, education, etc.)
  3. Save a specific dollar amount. This is no different than the percentage method; however, I realize that saving a percentage of each pay can intimidate some. If that’s the case, decide on a dollar amount you can comfortably put into savings each month. If it’s $50, divide that $50 between all of your savings goals. It doesn’t matter how small you start, just start!


Related Reading: How to Save Money When Living Paycheck to Paycheck


Where Should You Keep Your Savings?

Retirement Investment Accounts

If you are saving for retirement, your money needs to be in a 401k or IRA investment type of vehicle.


A 401k is a retirement savings plan offered by your employer. Not all companies offer 401k accounts. However, a few that do give an added bonus of an employer match to any employee contributions.

If your employer offers this, passing it up means you’re leaving money on the table. If your company matches your contributions up to a certain percent (my company does 5 percent), at least contribute enough to get your company match!


An IRA is an individual retirement account. You can have an IRA in addition to a 401k. There are two types of IRA’s — Roth and traditional IRA’s.

Traditional IRA’s are tax deductible and Roth IRA accounts are not. There are contribution limits and rules for each type; therefore, I encourage you to check out this additional information on the differences.

Education Investment Accounts

If you are saving for your kid’s college funds, you have a few different options. You can save using a 529 account, UGMA/UTMA’s, and Coverdell Educations Accounts.

529 Account

A 529 account is an educational investment vehicle sponsored by a state or institution that allows you to set aside savings for future educational costs. Your contributions are invested a risk level appropriate for your situation. Check out additional information here.


UGMA stands for uniform gift to minors act and UTMA stands for uniform transfer to minors act. Both UGMA and UTMA are custodial type investment vehicles which basically means you are responsible for the account until your child reaches the legal age to receive the funds and do with it as they please.

These accounts are ideal if you don’t know if your little scholar wants to actually go to college. They may want to travel the world or start a business – you never know! These accounts offer flexibility that a 529 account doesn’t; therefore, I encourage you to check out this article for more information.

Coverdell Education Account

A Coverdell Education Account is like a 529 account; however, you can use the money invested in this vehicle for qualified K-12 educational purchases too. The maximum contributions limits are lower and are available to individuals within a specified income bracket. There are many pros and cons to consider with a Coverdell Education account, formerly known as an Education IRA. For information check out this article.


Savings, Money Market, and Certificate of Deposits

If you’re saving for an emergency fund or short-term goals such as a remodel or trip to Paris, you have a few different options like a savings account, money market account, or a certificate of deposit. Let’s take a brief look at these types of accounts below.

Savings Account

An ideal vehicle for an emergency fund is a simple savings account. A savings account is an interest-bearing account held at a bank. Savings accounts different from checking accounts because they don’t have a debit card or checks attached to the account.

Your emergency fund needs to remain liquid and preferably be at a different bank to help discourage you from using it for non-emergency situations. I keep my emergency savings at Capital One 360 and have been a customer of theirs for years. My emergency fund stays on track because I’m not tempted to use it for non-emergencies.


If looking for an account with no fees, I recommend Chime. With Chime, you will have your own spending account and savings account. Sign up for auto-save and anytime you spend money, your purchases will be rounded up and you can save money. Plus, if you sign up for direct deposit, you will get your paycheck 2 days early! Learn more about the benefits of using Chime here.


Money Market Account

A money market account is a deposit account that incurs interest which is determined by whatever money market rates available at the given time. These aren’t money market funds but have higher interest rates that are appealing to those who meet the hefty minimum deposit requirements.

If you have a large sum of money sitting around in a checking or savings account, it might be beneficial to consider opening a money market account to make your money work harder and still keep it easily accessible.

These accounts come with a few more restrictions than traditional savings accounts but they are less risky than investing your money into the stock market. If you have a 6 to 12 months worth of emergency savings, this type of account may work well for you.

Certificate of Deposit

A certificate of deposit is a certificate that the bank issues to the depositor (you) who is depositing money for a certain length of time. These certificates come with a fixed interest rate and you receive access to the funds and interest after the time set forth on the certificate expires. You may be penalized if you withdraw early.

I’ve heard of people taking a portion of the emergency funds and creating a CD ladder. This would essentially allow you to earn a little more on your money and you would stagger the maturity dates so you would have some cash available at all times in case of an emergency. I’ve never tried this, but you can read more about it here if it tickles your fancy.

Related Reading: Emergency Fund: What You Need to Know



Knowing you need to save money and not knowing where to start is a frustrating as hell! However, don’t let this stop you from actually saving your coins. Face it — you will have an emergency, eventually. If you don’t have money for emergencies, you could go into debt.  Finally, not having money for an emergency simply sucks!

To prepare for whatever life throws at you, start saving today. Remember, if you ever want to fly across the Atlantic and touch down in Paris, you need money and your trip will be even sweeter if you take the time to save up for it!  Saving is a habit you will undoubtedly benefit from! So quit making excuses and start saving money using this article as your guide today.


Have any of you tried any of the savings strategies discussed? What’s one thing you want to save for that you haven’t started on? Will this guide help you reach your goal?


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Latoya Scott
CFEI/Social Entrepreneur
Latoya Scott is a Certified Financial Education Instructor and personal finance writer with a mission to help millennials learn how to stop living paycheck to paycheck so they can become financially carefree.

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  • Tia @ financiallyfitandfab October 3, 2016 at 3:36 am

    I’ve found automating my savings works the best – especially when it comes to retirement savings. Once you get in a habit, you don’t miss the money.

  • Emily @ JohnJaneDoe October 3, 2016 at 12:22 pm

    Great job as always. I think I end up pinning every article you do.

    The Dave Ramsey number always seemed way too low for me. although I get wanting to pay down and avoid more interest and worry about a bigger e-fund after you’ve paid down the debt. But it seemed like your minimum should be at least $1000 for each person in your family. And jobs aren’t always easy to come by, particularly as you move into the later demographics.
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  • Terri October 3, 2016 at 2:16 pm

    I agree that the Dave Ramsey number always seemed low. However, I like to think of it as motivation for getting to a bigger number – sort of like the snowball method of paying of f debt. You start small so that you feel accomplished and motivated to save more.
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  • Alexander @ Cash Flow Diaries October 3, 2016 at 6:07 pm

    Good stuff Latoya! I think its great to set the goals and conquer! I really think retiring at 45 is a good goal for me. If it wasnt for employing the type of strategies for saving money like you describe, I would not be no where close to hitting my goal.

    Cant wait to be financially free!!
    Alexander @ Cash Flow Diaries recently posted…September 2016 Net Worth Update – How To Track Net WorthMy Profile

    • Latoya Scott October 4, 2016 at 12:15 am

      How exciting! Can’t wait to see you reach your goal, Alexander!

  • Stacie October 3, 2016 at 7:16 pm

    Girl, you make me want to get my financial life with this! I don’t have a retirement plan. Man it’s time for me and hubbs to talk!
    Stacie recently posted…Thymes Vanilla Ambrette Candle + Thymes Warehouse Sale 2016 UpdateMy Profile

    • Latoya Scott October 4, 2016 at 12:16 am

      Yes, Stacie – have that talk!

  • Dyana October 3, 2016 at 11:51 pm

    I have a percentage taken out of each check and directly deposited into a savings that I know I will have no access too. This allows me to do my budgeting and save as well and for the first time it is really working.

    • Latoya Scott October 4, 2016 at 12:16 am

      Yes, Dyana! That’s the best strategy indeed. I love automating savings!

  • KenyaRae October 4, 2016 at 9:34 am

    Great strategies. I always had it automatically withdrawn and set aside doing my budgeted amount
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  • Tomiko October 4, 2016 at 12:03 pm

    I’m in the processing of paying off credit cards now.. I figure I will start saving once I pay off my credit cards. I’m down 3 and have 3 more to go but one credit card is the chase which has no interest for 18 months
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  • Joanna October 4, 2016 at 12:43 pm

    These are great tips. I worked towards paying off a lot of debt from my 20s to travel more now. I shopped WAY too much. Glad I am able to balance things out more. As far as savings go, I automate them. I checked my account one day and said “wow”. lol
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  • Kirstin Fuller October 4, 2016 at 10:41 pm

    WOW…what a wealth of information. Now I know what type of savings will work best for me and my money. Thanks

  • Candice October 5, 2016 at 12:55 am

    My hubby and I like to save a set dollar amount every pay period out of his pay, but I’m working on a plan to set aside a percentage of my blog income to dedicate solely to savings. Even with half of a plan in place, we’ve managed to save more this year than we’ve ever done in our 14 yrs of marriage. So I think we’re on the right track.

  • Joanae October 5, 2016 at 10:33 am

    We have started saving 100 a week. So that’s 800 a month. These strategies are great! Thanks for this. ❤
    Joanae recently posted…Marriage and SEXTING: 5 easy steps to keep it HOT!My Profile

  • steve October 5, 2016 at 11:08 am

    We have found working on a zero based budget helps us really stretch each dollar as far as possible. It is so true that when you focus on something and zone out everything else, you will be able to make great progress. Thanks for the comprehensive guide!
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  • Tiffany October 5, 2016 at 2:16 pm

    This was super helpful! I’m saving for a vacation right now but would like to dive deeper and start planning for a little more. Keeping this on hand for later- it was a heap of great information.

  • Valerie Robinson October 5, 2016 at 4:56 pm

    This is right on time! I recently joined a financial challenge and this is very useful! Thanks for the tips!

  • Ashlee October 6, 2016 at 8:42 am

    Great info! Will be reading this out loud with the hubs. Saving is rewarding.

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