Give yourself money!
Paying yourself first is the ideal way to save money for larger purchases and for emergency situations.
Setting aside money is an important step in reaching your financial goals. Michigan State University Extension can teach you how to save money for your future!
One successful savings is to pay yourself first, also known as PYF. It is a method of setting aside money for the future.
It might be wise to have two different PYF fund categories – one to save for an expensive item (such a car, house, spring break trip, new computer) and the other as an emergency fund. There is a benefit to having both! While there is an immediate need to save for those larger purchases, life sometimes throws curve balls which often requires extra funds to handle. A flat tire, a lost cell phone, new furnace, or some other unplanned and costly emergency could leave you with a financial burden. No one wants to stress about how to pay for a flat tire when on the side of the road. An emergency PYF fund can help make that situation less stressful and help you get back on the road, both figuratively and literally.
The first thing to do is set a financial goal. How much do you want to save? How much do you need to save? Establish a SMART goal for both your emergency PYF fund and for your saving goal. Knowing this, you can work backwards to figure out how much you need to save each week or month to reach that goal or build up your emergency savings account.
Once you have your goals established, the best way to PYF is to take money out of each paycheck or allowance immediately and place it in a separate account (or two accounts) that you don’t touch. Many financial institutions offer the ease of direct deposit of a paycheck to their establishment. This works well because you won’t see or touch the money and therefore have less temptation to spend it.
The other way to PYF is to specifically take a certain amount of money each month and move it to your PYF fund. This fund could be in a financial institution (bank or credit union) or it could even be a folder. The key is to faithfully set aside money each week or each month. Some people choose to do this by taking one-dollar a day or five-dollars a week and setting it aside. It adds up! Add this to your PYF fund and watch it grow.
Saving can be hard at first. It is like any new habit. At first, it can be a chore and feel awkward to do, but, as you keep saving, it becomes easier. Over time, you will find great success in having money in a PYF savings fund!
Many money management tools to help in saving and handling finances can be found at the Michigan 4-H Money Management website. The National Endowment for Financial Education High School Financial Planning Program has a youth financial education curriculum that includes PYF along with other budgeting strategies to emphasize this important saving technique.