This winter in Akron, Ohio, over 30 of city’s largest employers, financial institutions, non-profits and others are racing to help city residents save $1 million dollars.
The $1 million dollar savings goal and the coalition helping to reach it are part of the brand-new “Savings Community” initiative, led by Akron Mayor Donald L. Plusquellic, America Saves, and the U.S. Conference of Mayors. The initiative was designed by America Saves and the Conference of Mayors as a way to generate measurable, community-wide savings.
Organizations participating in the Akron pilot include AT&T, FirstEnergy, the University of Akron, the Akron General Medical Center, the Akron Area Association of Churches, and many others, including at least eight area banks and credit unions.
“We are delighted by the strong show of support from the Akron community,” said Nancy Register, Director of America Saves. “It demonstrates how serious city leaders are when it comes to helping residents gain better financial stability.”
As part of the initiative, financial institutions are promoting deposits to low- or no-fee savings products. Employers are promoting workplaces retirement and other savings programs. And non-profits and educational groups are offering financial education and counseling.
In addition, several households and individuals participating in the initiative are allowing the press to follow their savings progress over the course of the winter.
“By showing how a few individuals handle the challenges and rewards of saving, we hope to add a human face to an issue which is typically described as numbers game,” Register said.
The results of the Akron initiative will be announced in February 2009 during the third annual America Saves Week. Organizers plan to use Akron’s work as a model that can eventually be replicated in other cities.
It sometimes takes a life-changing event to make you re-evaluate financial priorities. In the case of Patricia Fike, that event was her divorce.
“When I went down to one income I knew I’d have to fend for myself,” she said. Now, after years of learning best practices and listening to people with “financial savvy,” Pat is close to meeting her goals – retiring within five years, maintaining, or even improving, her standard of living, and being able to afford to travel.
Pat started off modestly, saving amounts as small as $10 “that I thought I wouldn’t miss.” From there, Pat found more ways to save. Whenever she got a raise or bonus, she’d spend part of the money but put away the majority. When she quit smoking, she began to save the money she used to spend on cigarettes.
Pat also saves by automatic transfer from her checking to savings account after each pay period. She does her regular bill-paying online, and considers the transfer of money into her savings as just another regular bill – “like paying myself.” Once the money goes into savings, she taps it only in an “extreme emergency.”
Pat also investigated savings opportunities offered by her employer. Again, she started small, saving one percent of her pay in workplace 401(k) program. But when her tax preparer explained that Pat was leaving money on the table by not taking advantage of the three percent match that the company offered, she upped her contribution.
Setting and meeting savings goals helped motivate her, she said. “When I first started saving, a friend told me I needed $100,000 to retire – which of course these days isn’t nearly enough.” But having a goal helped her want to save. “I would get my statement and think ‘Wow! I have that much already. It gave me an incentive to reach my goal quickly.” She is now working on reaching the half million mark.
About nine years ago, Pat joined a women’s investment group, which meets regularly to decide on purchases and analyze investment choices. It was through the investment group that Pat first heard about Central Iowa Saves and signed up as a Saver, hoping to continue her pattern of learning and wanting to show support for the idea of sound financial management.
Pat emphasizes that saving doesn’t mean giving up fun. “I try not to deprive myself,” she said. “My friends would actually call me impulsive.” In fact, every other year, Pat goes on a cruise, spreading the cost over several months and saving her quarters for spending money.
The key to successful savings, she said, is making a commitment. “You’ve got to commit. When people say, “I’m barely making it, I can’t save,” that’s when you should go back and look at where you can cut down. Maybe you drink pop, maybe you smoke, maybe you go to Starbucks. Just cut one out.”
For many Americans, saving through a workplace program is to key to creating a safety net for emergencies and preparing for a comfortable, secure retirement. That’s why it is important to make sure you are maximizing your potential to save at work.
The following tips and strategies are designed to help you do just that.
Tips for Workplace Saving
Start early. Time can be a powerful tool if you start saving as soon as you can. That’s because of compounding. When all interest, dividends or capital gains are reinvested, their value grows exponentially. The earlier you begin to save, the earlier you begin to get investment returns on your saving, and the more time you have for compounding to work for you.
Investigate your options at work. Talk to your human resources representative or your boss to find out about savings programs available through your employer. Some programs, like 401(k)s and SEP IRAs, allow you to save for retirement by depositing pre-tax dollars in an investment account. By saving pre-tax dollars, you reduce the income on which you have to pay taxes, and your money grows faster when it grows tax-free. Other programs, such as traditional IRAs, allow you to save pre-tax dollars even if your employer doesn’t match your contribution.
Take full advantage of employer-matched contributions. Often, employers will match your contribution to a 401(k) or SEP-IRA program up to a certain percentage of your salary (typically 3 to 5 percent). If your workplace offers a program with an employer match, make sure you are saving up to the full percentage that is matched by your employer. If you don’t, you are leaving free money on the table.
Don’t withdraw early from your retirement account. The taxes and penalties for making an early withdrawal are usually steep and can even cause you to lose the money you earned through compounding. Establishing a regular savings account for emergencies can lessen the likelihood that you will need to take a loan or pull cash out of your retirement account to cover unexpected expenses.
Alternatives to Workplace Savings Programs
Even if your employer doesn’t offer a workplace retirement plan, you can still use your workplace to help you save.
If your company uses direct deposit to pay employees, have a portion of each paycheck deposited into a savings account instead of checking. Successful savers report that saving automatically is one of the easiest and most effective strategies for building an emergency fund or savings account. Most companies that use direct deposit allow employees to split each paycheck between two or even three accounts.
Set up an independent retirement account and deposit a portion of each paycheck into that account. When setting up your account, carefully select investment options to match your goals and risk tolerance. And pay close attention to fees. Just as compounding can add to your savings, paying even slightly higher fees can eat away at your returns over time.
If your company doesn’t use direct deposit, you can still set up an automatic savings plan. One way is to set up a savings account at the same bank where you do your checking and have regular, automatic withdrawals made from your checking into your savings. Also, many mutual funds will waive or lower minimum investment requirements and accept small investments when those payments are made by automatic account transfer. However, this may not be a good option for you if you regularly run a low balance on your checking, or if such a system could put you at risk of overdrawing your checking account.
If you’re trying to establish a budget, the method I recommend is to collect receipts for one month. Get a receipt for everything you spend money on, even small expenses. Sort the receipts into categories like food, housing, transportation, clothes, and entertainment and then tally up the totals for each category. You’ll be able to see where your money goes, and from there, you can decide where you want or need to adjust your spending.
Rita Smith
Crestview, FL
Before I go to the mall, I stop by the ATM and withdraw the amount I’ve budgeted to spend. I also plan for my shopping trip by making a list, and before I buy anything I make sure to ask myself if I need the item, or if I want it. Doing all of that helps me stay on track with my spending.
Sue Perez
Provo, UT
My approach to budgeting, spending and saving is to spend about 65 percent of my income on necessities, save and invest 20 percent, use 10 percent for personal costs, including clothing, meals out and entertainment, and save the final 5 percent for travel. As someone who is self-employed, it helps me weather fluctuations in my income, and I’m very happy with the results.
Margaret J. King
Philadelphia, PA
Going ‘green’ by using cloth shopping bags saves me money, since our local grocery store gives a five-cent credit each time I use a reusable bag instead of a plastic one. Check to see if your grocery store gives a credit for bringing in your own reusable bags. Not every store does, but it can save you a few dollars a year.
Merelaine Haskett
Beech Grove, IN
I save money by buying items online, in bulk. Some companies even offer free shipping on large orders. Clearance items are sometimes available, and good savings can be found on non-perishable groceries and diapers. This saves time and money!
Chelsea McKell
Provo, UT
I got tired of buying a variety of vegetables to make salads to bring to work for lunches, only to have them spoil in the refrigerator before I could eat it all. Then I decided to go in with my coworkers to split the ingredients for salads between us. We each bring one vegetable, sliced or prepared for our lunch salad, and combine all of our ingredients together. We get more variety this way, and the vegetables are not wasted. This not only saves us on the cost of going out to eat (paying restaurant prices, and gas to travel), but we also get time to relax together while we eat healthier.
Lisa Canape
Salt Lake City, UT
With the ever-increasing price of gas, I find that it’s cheaper to walk whenever possible. Not only that, but it’s healthier and environmentally friendly too. If I do need to drive, I’ll combine errands and plan to do several trips at once.
Luke Kirby
Panguiteh, UT
Clean out and cook everything in your fridge and freezer and dust off your pantry shelves once a quarter. You’ll save on groceries that month and use things you’ve bought and forgotten about!
Wisconsin Saves has partnered with Money Smart Week. The campaign was featured in all class calendars and newspaper inserts for this week-long October event. The campaign continues to gather information on savings resources throughout Wisconsin on its new website, www.wisconsin-saves.org.
Tennessee Saves is in the midst of a statewide planning drive for Saves Week 2009. Information and calendars have been distributed to extension agents across the state, and the planning team has even added a jingle contest to its Saves Week agenda.
In September, the Virginia Tech Cooperative Extension Service launched a new campaign, Peninsula Saves, in the Newport News area of Virginia. The more than 20 organizations in the campaign working group include local financial institutions, businesses and non-profits. See more at www.PeninsulaSaves.org.
Okaloosa Saves (FL) recently completed its 2008 Child Savings project, tripling the project’s impact from last year. This year, 280 youth made 289 deposits for a total saved amount of $39,379.84. This fall, the campaign is focusing on outreach to employers with the “Cash for Your Bash” project.
Ohio Valley Saves (WV) visited several area colleges during “Freshman Days” to reach out to and educate college students. The campaign offered two $500 scholarships as prizes to students who made a commitment to save and had over 200 freshmen register as Savers.
Military Saves is working with its bank and credit union partners to develop new product offerings and marketing programs to support the quarterly messaging themes being introduced in 2009. The themes are: save and invest, youth, debt reduction, and retirement. The Department of Defense and CFA are preparing to unveil plans for the roll out of the Military Youth Saves initiative that piloted in 2008.
Kansas City Saves has been re-launched, with a new working group that includes financial institutions, community service organizations and government agencies. The campaign’s initial focus will be on organizing for Saves Week 2009, which is scheduled for February 22-March 1.
DC Saves recently participated in a free financial planning clinic run by the Certified Financial Planner Board of Standards, spreading the word about DC Saves to more than 500 attendees and signing up new Savers. The campaign has also partnered with the Capital Area Asset Builders’ Individual Development Account (IDA)and Marriage Development Account (MDA) programsto enroll and offer DC Saves benefits to IDA and MDA Savers.
Charlotte Saves has been asked by local morning show, “Fox News Rising,” to provide expert saving advice. Campaign staff members began sharing savings and credit tips with viewers in September and are scheduled to be featured monthly.
Central Iowa Saves has presented savings information to more than 20 area organizations over the past few months, including presentations at the Veterans Affairs Medical Center, Principal Financial Group, Iowa Farm Bureau, Mercy Hospital, Polk County Housing Continuum, and FBL Financial Group. Since launching this past spring, the campaign has signed up over 500 Savers.
