The Underrated Savings Milestone You Can Aim To Achieve Each Month

Saving money in this economy can feel impossible at times. While, as of August 2024, inflation is finally below 3% (for the first time since March 2021), prices are still up by a whopping 20.8% since February 2020. This has created additional financial strain for many American households. In fact, the total U.S. household debt — as of the second quarter of 2024 — was $17.8 trillion, with increases across all categories, from mortgages to credit cards. This total averages to about $104,215 in debt per household. All of this is to say, many in the United States are struggling to keep their financial heads above water, which can make the idea of saving money take a back seat.

Technically, the average American family has $62,410 in savings, checking, and money-market accounts (according to the Federal Reserve's 2022 Survey of Consumer Finances), but it's worth noting the average person aged 45 to 54 has $50,590 more than the average person under 35. This means the distribution of savings isn't only more heavily weighted among older adults but is also significantly affecting the average savings amount.

Keep in mind average savings amounts can also be affected by household size, as well as by race (there exists a racial wealth gap between white Americans and Black and Hispanic Americans). With this in mind, there are some important savings tips and tricks that can help you maintain your quality of life. There's even a specific savings milestone you can set for yourself to help you reach your goals sooner.

While it might sound simple enough, avoiding having to pull money out of your savings account every month can prove a significant financial milestone to reach. Not only because it'll mean you're successfully budgeting your expenses (and staying within that budget) but also because it means you'll reach your savings goals sooner.

Even though many of us might start off strong every month by depositing money into our savings account, inevitably, we might end up having to pull some of that money back out to pay for monthly expenses. In emergency situations (note, it's important to keep an easily accessible emergency fund), pulling money out of your savings can be the logical choice, but if you find yourself pulling funds out on a regular basis, then it could be worth reevaluating your monthly budget.

Whether you decide to go with a specific type of budget (like zero-based budgeting or even the 50/30/20 budget) or you use a budgeting app to keep tabs on your expenses and transactions, finding the right approach for your needs is a key first step. What's more, creating a habit of leaving your savings untouched can allow you to grow your savings faster, which can be great for everything, from creating an emergency fund to making a large purchase to saving for retirement.

While not pulling money out of your savings each month can be an important benchmark in your savings journey, there are plenty of other small ways to increase your savings behavior as well. One, avoiding paying interest on rollover debt like credit card balances can be a great way to save money each month. According to LendingTree, as of August 9, 2024, the average credit card interest rate in the U.S. was 24.92%; this marked the highest rate LendingTree has reported since it started tracking monthly interest rates in 2019. This means keeping a balance on your credit card can end up costing you quite a bit in interest (plus, despite being a popular financial myth, keeping a balance does not help your credit score).

Another important consideration is what kind of savings account you use. Keep in mind that with inflation still a factor, having a savings account that provides a high annual percentage yield (APY) can be the key to making sure your money maintains its purchasing power. An APY that's more than the rate of inflation ensures you aren't losing the value of your money while you're actively saving. Plus, if you find a high-yield savings account with an even higher APY rate, you can also help your savings grow just by leaving it in your account. This can help you reach your savings goal faster, without any extra work for you.