Our next series is about to begin and I’m here to jump into the topic of saving lots of money. The first area that I wanted to cover with saving money is the power of passive savings.
These days everyone is searching for get rich schemes and the newest way to invest your money. We all want a sexy investment. The thought of slowly saving money over time just doesn’t sound appealing at all. Interest rates in a savings account are about 1% and watching this money grow can feel like it’s taking forever
What are passive savings?
It’s when you save your money on a consistent basis and just leave it alone. This means that you leave your money in some sort of a savings vehicle where you can’t easily access your money. This also means that you have to forget these savings as you live your life. Your money grows while you forget about it.
How did I save money passively?
When I first got a decent job at 18, I remember getting a letter about savings bonds from the payroll department. Instead of tossing it out I decide to look into this idea. After looking into it I realized that if I filled out a few forms, the payroll employees would automatically deduct a set amount of money off every paycheck that I receive.
I first setup the deduction for $25 every two weeks. Then I bumped it upto $50. I don’t go near this account. I don’t touch the money. All I do is look at the annual statement when it comes in the mail in January. Last January I was impressed to find out that there was over four grand saved up. That’s a lot of money to passively save up over time without even realizing it. It sure beats checking on your money every day to see how your stocks are doing.
Do you just leave the money?
Yes. Just leave the money in the savings account. For me to access this account I have to call a bunch of different places and go through a few forms. It’s not worth it for me. This is why I have just left the money in the account. I also advise everyone else out there to just leave the money in the specific savings account that it happens to be in.
How long do you wait?
Until you meet your financial goals. I really don’t know what I’m waiting. I’m just letting the money add up. Perhaps I’ll spend it on a large trip one day. Maybe I’ll leave it until I really need it. Maybe I’ll donate it to charity. I really don’t know what the right time is. It all depends on what your goals with your money are. You can wait a year or you can wait ten years.
What if I need the money?
My advice is to tap into your emergency fund or any other savings first. Then you need to take a step back and ask yourself two questions:
- Do I really need the money?
- Can I just wait?
You’ll quickly find out that you won’t always need the money. I hope that you let the money grow while you carry on with your everyday life.
I really feel that you can save lots of money when you’re passive and you just leave your money alone. Once you let your money sit in an account, you’ll be surprised to see how it accumulates over time. Have you ever passively saved money?
(photo credit: lauren j)