Practical guide to create and maintain a saving habit.

Knowing how to manage your own resources is almost an art. You need strategy, mastery of some fintech or digital tool that allows you to make calculations and visually track your expenses — and above all, plenty of foresight. In this post, we’ll discuss how to design your personal savings plan so you’ll never have to say again: “I can’t make it to the end of the month!”

What is a savings plan?

Over time, we’ve learned that proper management of our finances is essential to achieving financial stability and fulfilling our goals and dreams. That’s why from a young age we need to understand what money is and how to distribute it based on our needs.

If we truly want to start saving seriously, the first thing we must do is create a realistic savings plan that aligns with our income level and personal circumstances. A savings plan is a financial strategy that helps individuals set aside a portion of their income consistently and systematically to invest it in a medium- to long-term project. In other words, an effective savings plan accounts for all variables to calculate the exact amount that can and should be saved each month.

One of the main goals of a savings plan is to create financial stability and set spending limits to avoid unnecessary or impulsive purchases that make us lose control of our money.

What types of savings plans exist?

To design a savings plan that best fits each person’s or family’s needs, there are several types of savings plans, which we’ll look at below:

• Savings accounts: these are the most basic and accessible. Offered by banks and financial institutions, they generally provide modest interest rates but offer liquidity and security for saved money. Recently, some digital-native banks have begun offering these types of accounts completely free of charge.
• Certificates of Deposit (CDs): low-risk investments where a sum of money is deposited for a fixed period at a predetermined interest rate. CDs provide higher returns than savings accounts but restrict access to funds during the agreed term unless penalties are paid.
• Investment funds: these are investment vehicles that pool money from multiple people to invest in a variety of financial assets such as stocks, bonds, or real estate. They provide growth opportunities but carry market-related risks.
• Retirement plans: these are designed specifically to save for retirement. Examples include Individual Retirement Accounts (IRAs) and 401(k) plans. They offer tax benefits and investment options to ensure a comfortable retirement.
• Emergency funds: this isn’t a specific account type, but a key concept. An emergency fund is savings set aside to cover unexpected expenses — such as home repairs, medical costs, or job loss — without resorting to debt.
• Education savings plans: these accounts are designed to save for and pay education expenses, either for children or oneself. Examples include 529 plans in the U.S., which offer tax advantages for higher-education savings.
• Investment accounts: these accounts allow investors to buy and sell financial assets like stocks and bonds with the goal of achieving long-term returns.

As you can see, these are the most common types of savings plans — but even so, they can be further customized depending on agreements reached with the specific bank.

How to create a personal savings plan

You’ve finally realized you need a savings plan in your life! But where should you start? First of all, the most important thing is to arm yourself with willpower and not postpone it any longer — the longer you wait, the harder it will be to adapt. Once you’re mentally prepared, follow these steps to build your savings plan:

Set clear goals: define exact amounts for expenses, income, and savings. Think it all through carefully so you don’t overlook any relevant data. Experts recommend starting with small savings goals and gradually increasing them over time.

Track income and expenses: first, list fixed monthly expenses and income, then identify non-essential regular expenses to detect the most dispensable ones.

Design your strategy: this is the moment to compare supermarket prices, explore other mobile rate options, check what other utility providers offer, take advantage of deals, etc. You’ll likely realize you can cut quite a bit, though this process requires ongoing market research and attention.

Follow the 50-30-20 rule: it’s simple to explain but requires discipline to maintain: 50% for essential expenses, 30% for discretionary spending, and 20% for savings.

5 Fintech apps to help you execute your savings plan

As expected, new technologies also help with personal finance. Thanks to Fintech, we now have access to multiple applications that make it easier to track our expenses. Here are a few examples:

• Fintonic: this app allows you to manage your personal finances easily. You can link your bank accounts, credit cards, and other financial products to get a full overview of your income and expenses.
• Cleo: a virtual financial assistant that uses artificial intelligence to help you save money. The app analyzes your spending habits and gives personalized recommendations to improve your finances.
• Acorns: this app helps you save by investing the spare change from your purchases. It rounds up your linked card transactions to the nearest dollar and invests the difference in a diversified portfolio. It’s a simple way to save and invest small amounts without noticing.
• YNAB (You Need a Budget): based on a budgeting method that helps you assign every dollar of your income to specific categories. YNAB allows you to set savings goals and track progress in real time.
• Mint: Mint is a financial management tool that lets you create budgets, track expenses, and receive alerts about payments and due dates.

Now that you know the most important steps to create a personal savings plan, it’s time to put them into practice and continue learning about professional and personal development with Educa.Pro. Join our newsletter!