THERE are several ways you can save money – but some are disappointed with the lack or no appreciation that they see over time.
Common ways Americans save money are through retirement accounts, other investments, emergency funds, or bank accounts.
But for some, this isn’t working and they are looking to reverse their fortunes in hopes of one day building a $1.9million savings pot.
We explain some reasons why your savings might be failing to experience little or no growth.
You’re spending too much money
It’s possible you might not be putting enough money into your savings because you’re spending too much.
This could be because you have too many unnecessary expenses.
Some ways you can cut costs include switching to streaming from cable and by watching your grocery bill.
You can also earn more money when you shop by using cash back services.
You are earning little or no interest
Those who are storing most of their money in a bank account might not be earning a lot in interest.
Instead, what you might want to try is depositing your money into a high-yield savings account if your goal is to earn more interest.
Importantly, a high yield can pay 20 to 25 more in interest rates versus a traditional savings account.
Usually, Americans use high yield accounts for an emergency fund, which is a savings plan that can help with possible financial trouble in the future including job loss.
You’re not contributing enough
When it comes to investing or savings in general – you need to contribute to maximize growth.
Unfortunately, your money won’t grow a whole lot if you just rely on the balance already in your account.
In other words, you need to contribute as much as possible.
When it comes to 401ks, an employer-sponsored retirement plan, for example, experts recommend contributing about 15% of your gross income.
And plus, some employers will match up to 5% of each paycheck. This is essentially free money that’s coming your way.
While you’ll want to take advantage of that, keep in mind that this is an investment – which is never guaranteed a return – especially if your money is going into the wrong places.
Money is going into the wrong places
Speaking of money going into the wrong places – this could be the most likely reason why your savings aren’t growing.
For investments – make sure you carefully look at where your money is going and take a look at the average annual return rate.
A good way to start is by looking at index funds, which are seen as safer bets when compared to individual stocks.
Index funds can contain holdings of stocks, bonds, commodities, as well as other assets.
The performance of an index fund depends on how well the benchmark its tracking is performing.
For instance, the S&P 500 has returned an average of 11.71% annually from 1990 to 2020, according to a calculation from investing and personal finance website MoneyChimp.
Some S&P 500 index funds you can check out include the Schwab S&P 500 Index Fund, Vanguard 500 Index Fund Admiral Shares, and the Fidelity 500 Index Fund.
Find out how much you’ll lose by withdrawing money early.
We explain when you need to withdraw before penalties kick in.
Plus, we break down five things you need to do before claiming Social Security.
We pay for your stories!
Do you have a story for The US Sun team?
Read More: Four reasons why your savings aren’t growing – and how to boost them