Americans favor direct deposit, auto fund transfer for saving
Fast Facts:
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- America Saves Week is Feb. 23-28
- America Saves pledge-takers favor direct deposit and automatic fund transfer to save
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LITTLE ROCK – When it comes to saving money, America Saves pledge takers favor direct deposit or automatic electronic fund transfers, according to a Consumer Federation of America survey.
This year, the Cooperative Extension Service has joined the Consumer Federation of America for the 2015 America Saves campaign to encourage people to save money, reduce debt and build wealth. America Saves Week is Feb. 23-28 and this year’s theme is “Set a Goal. Make a Plan. Save Automatically.”
The survey, conducted last March found 70 percent used an automated method as their primary savings method, with 39 percent selecting “direct deposit payroll” and 31 percent selecting “automatic electronic fund transfer.”
“For years America Saves has promoted automatic savings as the key to successful saving. We also consistently receive tips from savers which say setting up automatic savings methods is one of the best ways to save because they can set it and forget it,” said America Saves Director, Nancy Register.
A thousand reason to spend; five good reasons to save
And while Americans have plenty of reasons to spend, Laura Connerly, assistant professor and money management expert for the University of Arkansas System Division of Agriculture, said “whether you’re a new or long-time saver, there are five places you might portion out your savings:
1. Emergencies -- Personal finance experts recommend having an emergency savings fund with enough money to cover all of your living expenses for two to six months. “Use this fund to pay for unexpected expenses or to cover living expenses if you lose your job,” Connerly said. “If you’re just starting out, set a beginning goal of $500.”
2. Retirement – The two first line places to save for retirement are an employer provided retirement fund and an Individual Retirement Account, or IRA. “Many employers offer a retirement savings benefit – usually either a 401K or a 403b,” she said. “Aim to contribute the maximum amount that your employer will match.” If you can’t contribute the full amount right now, try to increase your contributions in small increments whenever you can. For example, pay off a credit card balance and use that amount toward saving. Plan ahead now to use all or part of your next raise for your retirement fund. If you don’t have an employer provided retirement plan, open an IRA. Most workers can contribute $5,500 ($6,500 for over age 50) annually into a tax deferred IRA. “Once you’ve maxed out your retirement and/or IRA contributions, consider other investment options,” Connerly said.
3. Home -- Saving toward home ownership can be saving for a down payment, paying additional to the principal of a mortgage loan, or saving toward the full purchase price of a home. “If you’re a renter and want to own, you’ll need a down payment,” she said. “The amount you’ll need for a down payment usually ranges from 5 to 20 percent of the price of the home.” Different lenders and types of loans require different percentages. If you already own your home, you can save thousands of dollars in interest over the life of your loan by paying an additional amount toward the principal each month. Many consumers prefer buying a home to renting because real estate is typically an appreciating asset, thereby, increasing wealth.
4. Education – Most Arkansas college students can tell you the scholarships available usually don’t cover the full cost of tuition and living expenses. According to recent research, the cost of tuition, fees, room and board at a public four-year institution is $18,943 for the 2014-15 school year -- which doesn’t include transportation and miscellaneous personal expenses. Most students don’t receive enough grants and scholarships to cover the full cost. Student loans can fill in the gap but should be kept as minimal as possible. “Starting life on your own has enough challenges without the additional burden of student loan debt,” Connerly said. “Limit future debt by saving in advance for college costs.” In addition to regular savings and investment accounts, two special college savings venues are 529 plans and Education Savings Bonds. Be sure to thoroughly explore all the options to find your best college savings plan.
5/ Hopes and Dreams – Once you’ve met your savings goals for your emergency fund, retirement accounts, home, and education; it’s time to focus your resources on making your other savings goals. This could be for a trip to the Bahamas, a new pickup truck, or a special donation to a charitable organization.
“Envision your future and create a savings plan to make your dreams come true,” Connerly said.
The Cooperative Extension Service, part of the University of Arkansas System Division of Agriculture, is your source for reliable, research-based information to improve quality of life. Discover the latest recommendations for money management, nutrition, health, parenting, relationships, and personal development. Learn more at www.uaex.uada.edu.
The Arkansas Cooperative Extension Service offers its programs to all eligible persons regardless of race, color, sex, gender identity, sexual orientation, national origin, religion, age, disability, marital or veteran status, genetic information, or any other legally protected status, and is an Affirmative Action/Equal Opportunity Employer.
By Mary Hightower
The Cooperative Extension Service
U of A System Division of Agriculture
Media Contact: Mary Hightower
Dir. of Communication Services
U of A Division of Agriculture
Cooperative Extension Service
(501) 671-2126
mhightower@uada.edu
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