Start saving: Pennies can turn into big dollars
June 1, 2009
Have you ever heard the tongue-in-cheek saying, “Why do today what you can put off until tomorrow?”
Despite its sarcastic nature, there are plenty of people who procrastinate and actually live by this philosophy. (Full disclosure: If I’m not careful I can be quite the procrastinator myself, so I’m certainly not looking down on those who tend to put things off.)
I think people tend to procrastinate particularly if the task is either difficult or boring. And this is what leads many people to put off fixing their finances. Let’s face it, budgeting and saving isn’t exactly exciting. And it can be scary and seem impossible, especially if you are facing a big financial crisis.
I always tell people that it’s easier to pay off $5,000 in credit card debt than it is until you’ve amassed $50,000 in debt. It seems like a no brainer, but sometimes it’s easier said than done.
The same goes for saving. According to a Bankrate.com survey, fewer than four out of 10 Americans have an emergency fund to fall back on. Roughly 70 percent of people have some sort of savings, but it’s less than the recommended three months of living expenses.
Not long ago I was reading an MSN Money article by Liz Pulliam Weston. She was writing about the importance of saving right away and compounding that savings. Here is her illustration of how compounding works:
“If I gave you a penny and promised to double it every day for a month, at the end of 31 days you would have — this is no typo — more than $10 million. At first, the doubling is no big deal, as 2 cents becomes 4 cents becomes 8 cents. As we keep going, though, those gains start to build up. The return on your money earns its own returns, and by the end we’re talking real cash.”
Granted, we aren’t going to save $10 million in a month, but if you’re not putting anything aside, and you can start to save something and gradually add to it, you could manage to save a larger amount of money than you thought capable.
Don’t procrastinate. And don’t feel overwhelmed with a large savings goal. Start with what you can, even if it’s only pennies. It could turn into real dollars.
Here’s a calculator to help you figure out how much money you can save.
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