Small steps, big results: The power of micro-savings

In a world of rising costs and so many demands on our spending dollars, achieving long-term financial goals or even making big-ticket purchases may seem out of reach. Enter micro-saving, a practical and effective method of breaking larger financial goals into smaller, manageable steps. If you’re unfamiliar with the term, it’s basically the concept of mapping out a plan, then saving in small bites. Here, we’ll offer some easy steps to micro-save.

Set specific goals, then break them down

Whether it’s creating an emergency fund, buying a home, or taking a major vacation, having a clear goal will motivate you to save.

Breaking down your targeted savings amount into smaller goals will help you stay on track. For example, maybe a goal of saving $1,000 a year sounds insurmountable, and if you don’t feel like you’re on schedule, it’s tempting to abandon the plan. However, saving $20 a week sounds much more manageable. If, after a realistic look at your budget, you can only start with a $5 or $10 goal per paycheck, that’s OK too — just remember to adjust the target amount accordingly.

Build a budget

A budget is your financial roadmap. Once you calculate your income and expenses, it will be easier to understand how much you can realistically save and identify areas where you can cut back on spending to allocate more toward savings.

Saving small truly can be budget-friendly. It doesn’t require major sacrifices in your daily life. Even small lifestyle adjustments, like cooking at home instead of dining out, or cutting back on morning coffee or movie nights, can free up money for savings. As your financial situation improves, consider increasing your micro-saving amount. Small increases won’t drastically impact your budget, but they can significantly accelerate your progress.

Plan for purchases

Using a tool like our big purchase calculator can help you determine costs of major purchases. It does the savings math; you plan accordingly.

Designate your savings spot

Open a separate savings account solely for the purpose of achieving your target goal. This will help you track your progress and prevent you from dipping into your savings for everyday expenses. You’ll want to look for an account offering a competitive interest rate, as the magic of compound interest is a significant advantage of saving small. As your savings grow, they earn interest, the interest generates its own earnings, and so on — and your money multiplies faster than you might expect. If you have an existing savings account that you are designating for your purpose and already have a substantial balance in it, you may consider a certificate of deposit, money market account, or an Online Investing* account, which may produce a higher rate of return.

Put your savings on cruise control

Set up automatic transfers from your checking account into this new (or newly labeled) account. This way, you won’t have to rely solely on willpower to save consistently. Even better, use direct deposits straight from your paycheck into your savings account(s) as well as into your checking account — out of sight, out of mind.

Look for hidden savings

Using coupons, cashback apps, and taking advantage of sales and discounts on purchases that you have already budgeted for can help you reach your goal faster. Transferring the amount saved, regardless of the size, into your designated account right away keeps you from accidentally spending it.

Similarly, using a free service like UBT’s RoundUp makes it easy to effortlessly stash away small amounts of money every time you use your debit card because your purchase is rounded up to the next dollar amount and the difference deposited into your savings account — and those small amounts add up!

Embrace windfalls

Whenever you receive unexpected money, like a cash gift, tax refund, or a bonus, consider funneling all (or even a portion of it) toward your savings goal. The same goes for cash gifts, or even money from returns, if you’ve already budgeted for that purchase. Windfalls can give your micro-savings a huge boost.

Don’t forget your 401(k)

Changing your 401(k) contribution by 1% is a small difference on your paycheck but will make a big long-term difference.

Saving even a small amount regularly instills a sense of financial responsibility and discipline. More importantly, though, the only way to reach the finish line is to start moving. Start small, be consistent, and know that your friends at UBT are here to help.

Looking to get even more from your finances? Register for The Five Principles of Financial Wellness, our free, self-directed course that puts you in the financial driver’s seat — and we’ll check in at the crossroads, just in case.