Smart SpendingSmart Spending

5 easy ways to save money

The trick is to create an emotional or physical barrier between you and the money you want to set aside.

By MSN Money Partner Mar 5, 2012 11:46AM
This post comes from Sarah Gilbert at partner blog Get Rich Slowly.


Get Rich Slowly on MSN MoneyIt was America Saves Week when I wrote this post, and I was sitting next to a jar stuffed with $5 bills.


I'm not proud that this is, to date, the best way I've found to save money consistently. Yet having it there on the windowsill is a gentle reminder that there are more important things than the x (a new wireless router; mine is working, just not sparklingly), y (a quick run to the shop on the corner for a thermos of coffee) and z (delivery pizza for dinner instead of leftovers) that I could spend my available cash on.


I can't quite figure out why it works, but I think there is some deep insight here. The thing is, there is "saving" money and then there is "saving money." In one case, you are putting money away that you intend to spend later (much, much later, if all goes well). In the other case, you are spending money, but not quite as much as you would have otherwise. The trick is to move the extra money from the latter to the former.


Here are the five best ways I've found to do that.


1. The $5 bill jar. 
I found the $5 bill jar on Pinterest, but the idea came from my 9-year-old, who told me one day shortly after Christmas, "Why don't you pick an amount every time you get money, like $20, and put it in a jar to save?"


"What am I saving for?"


"Christmas presents! That way you'll have a whole lot of money!"


The $5 bill jar works like this: Every time you come into possession of a $5 bill, usually as change from another purchase, you save it and put it in a jar. Some savers put them in an envelope in their wallet and, every $50 or so, transfer the money to a savings account. Other savers have a goal in mind, like Christmas presents.


I'm combining two Pinterest ideas, and I've painted chalkboard paint on my jar so I can write in what I'm saving for.


I haven't counted, but there must be $30 or $40 already after just a few weeks. I think this works by setting an easily followed rule that creates an emotional barrier between me and the money. If I spend a $5 bill, I've betrayed my internal rules. (Post continues below.)

2. "I'll give you all the money older than you."
This is a natural outcome from the inspiration given to me by my first work mentor, Herb Althouse. He was a managing director in the loan syndications group at First Union, my first job out of college. I was not even 22 when I started work, and he thought of me as impossibly, adorably young. To emphasize my adorable youth, he would regularly dig in his pocket and give me all the coins that were older than me.


Ever since, I've very carefully saved all the coins older than me; I won't spend a 1970 quarter, even if that means I have to use inexact change. It's an emotional tribute to Herb. I realize that this won't result in saving a ton of money (especially if you were born before the 1960s), but it helped me establish the limits that are now keeping me from spending my fives.


3. The paycheck deduction is a no-brainer (literally).
I remember when I first earned a paycheck at Arctic Circle. Displaying my adolescent quant jock nature, I would carefully calculate what my next paycheck would be after taxes were deducted. It was so frustrating to know how much the gross income was and then be able to spend only the net. I had a cheerleading uniform to save for!


Most adults don't, like 14-year-old me, sit with a notebook, a pencil and a calculator, figuring out what each check will look like. You get used to seeing only the amount in the "net" line and forgetting the deductions. That's why it's so useful to take advantage of whatever automatic savings plan your employer might offer, whether it's a 401k or a simple automatic deduction into a savings account you designate. (The Army has a fantastic savings plan for military members deployed in designated combat zones that allows soldiers to earn 10% interest on up to $10,000.)


Pre-paycheck deductions allow you to create that emotional distance from the money you need to keep it in a savings account. You very literally don't think about it, the literal definition of a "no-brainer."


4. Attaching your savings to a promise is a great way to make it happen.
My 9-year-old was probably inspired by the summer we saved for his Nintendo DS. I was reluctant to get a game machine, but when his dad was deployed for the first time, the two of them agreed we would tie it somehow to goals we had for his behavior. So we decided that each time either Dad or I got paid, we would put $20 in a special envelope toward the DS, if he had been helpful over the preceding period. If he was unusually patient or wonderfully helpful, I'd add in a little extra, $5 or $10.


While we were somewhat generous in assessing helpfulness, he was also quite helpful, and because I'd promised to tie the reward to his behavior, I had a powerful emotional incentive to keep my word.


5. Adding pain to both the front end and the back end is another way to save.
Yes, we're motivated best by positive stimulus. But adding penalties is sometimes the best way of forcing ourselves to do things. I am, for instance, a wonderful saver. I can transfer money into my online savings account with the best of them. However, I'm awful at keeping myself from accessing that money if, for instance, I really want to take advantage of a one-time-only offer on super-awesome film for my vintage Polaroid SX-70.


So it's best if I put my money in an account from which I will not be able to withdraw money easily, or without penalties. For instance, I find that the "penalties" (in both brokerage fees and time for the sale to clear) of selling stock in my ShareBuilder account are effective as a deterrent. I would have to lack money for food or the mortgage before I'd tap that.


We all want to save. We just need help.
I don't think there is a single Get Rich Slowly reader who doesn't have a desire to save and to keep that money in the savings account until the emergency occurs or the goal has been reached. But it's really hard, and I'd be willing to bet that a surprisingly large percentage of GRS readers don't save or don't save nearly enough.


Starting small and easy is best, and keep in mind that we have a strong set of emotional tools at hand to help us along the way.


How can you set up emotional connections to savings, both on the front and the back end?


More on Get Rich Slowly and MSN Money:

Apr 15, 2012 6:19PM

Yes put all your $$$$$$$$$$$ in the bank so they can fail and give you cents on the $.  But before that they will rob you blind with service fee's.


 Move into a cardboard box or under a bridge until you can afford these things and you'll be okay.

Apr 15, 2012 6:09PM
I am a student and don't earn a great deal but I do manage to save a little to pay for car insurance by picking up those pesky pennies that people throw away regularly. Thank you and long may you continue to do that.
Apr 15, 2012 6:03PM
I find the comments more helpful than the article. Also I've decide to pay myself for every hand job $ 10.00 so I will be a millionaire very soon or really, really in debt !
Apr 15, 2012 5:59PM
I guess it is a good idea for people who have jobs or who didn't lose a good job 7 years ago. If you are still trying to make basic ends meet, not so much. I haven't been able to save any money since I started working a $10 an hour job and paying my student loans and choosing between food and lights (have to have lights for the senior citizen in the house, though).
Apr 15, 2012 5:52PM
I found that you can negotiate prices with prostitutes. You DON'T have to pay $20 for a hand job!!
Apr 15, 2012 5:37PM
I save all of the $2 bills I come across.  If I get just two more, I will have 4 dollars!
Apr 15, 2012 5:15PM

You know, I hear all the time from many of our fulltime younger employees about "they can not seem to save any money".  The company I work for on a very part time basis provides as a company benefit coffee, tea and hot chocolate along with the cups and plastic utensils. All of this is in a break room with microwave, toaster, sink with hot and cold water with an instant hot unit and a really big refrigerator. 

The older full time and part timers like me use the break room to store our lunches brought from home and make coffee and so forth during the day.

The younger full and part time employees bring their coffee and pastry from starbucks in the morning, go out to lunch and send out for afternoon break.

We ask the younger employees how much in a month do you spend on food when at work. We nearly fell over when three of them said about a hundred dollars a week. We suggested on half of those days to bring lunch from home and use the company paid break room provisions.  They all agreed they rather spend the hundred a week. Moral is not can't save it is won't save.

Apr 15, 2012 5:09PM
Save money by ending contributions to corrupt institutions like religions.
Apr 15, 2012 5:07PM

How about using both sides of the toilet paper?

Apr 15, 2012 5:01PM

Pay your tithes then pay yourself for a job well done. Save 10%  of what's left of every paycheck.


Apr 15, 2012 5:01PM
I would like to see the President of the U.S read this! He could start by him  and Michelle taking the same plane on vacation! Not paying off his union supporters with tax dollars! Stop giving billions to the solar industry that keeps gping bankrupt! Maybe Obama could have a "billion dollar jar"!
Apr 15, 2012 4:49PM
My dughter and I go to the Topsfield Fair every year.  To fund this, I put all my change in huge pretzel jars.  I have one in work and one at home.  I start the day afer the last fair!  Last year, we were able to do a "girls weekend".  I saved enough for a hotel room for the night and the entire fair (admission, food, games) and still had some left over.  It doesn't hurt as much when it comes time to go and we have a BALL!!!
Apr 15, 2012 4:48PM
I started by saving my change as a kid for Christmas gifts. I still do it to this day & just take ALL the change we have collected to the bank to the change machine & cash it. Then I just use what we have saved for gifts. I have started getting $20 cash everytime I go grocery shopping & puting it away. It adds up fast!
Apr 15, 2012 4:18PM

This was a big hit on the Smart Spending boards that were hosted by Donna Freedman and started out as The Spare Change Challenge and evolved to the $5.00 Bill Challenge back in 2008. It's a very neat way to save money starting in January of each year and going to December 31 of each year.

Apr 15, 2012 4:17PM
I save all my change and $1000 from my tax return every year, its my daughters college fund.  So far I have about $8000, it won't pay for college yet but its a start.
Apr 15, 2012 3:32PM
Great advice, but if I had money to stash aside or buy gift cards I don't think I would be looking for ways to save.
Apr 15, 2012 3:24PM
I save all of my change, began in February and have already accumulated about $80. This is my christmas cash.
Apr 15, 2012 3:09PM
The $5 method is a good one. I can't afford $5 at a time, so I just save all my $1 bills. By the end of the month, I usally have about $30 dollars.
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