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Financial Literacy
Course: Financial Literacy > Unit 2
Lesson 3: Saving money- Why and how to save
- Why and how should I save money?
- Planned and unplanned expenses
- I am ready to save. What is the next step?
- Saving wisely: emergency fund
- Emergency fund
- Saving wisely
- Saving wisely: planned expenses
- Paying yourself first
- Pay yourself first
- Paying yourself first
- What are different types of savings accounts?
- What is interest and how does it work?
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Pay yourself first
Learn how to structure your paychecks around paying yourself first.
You might have heard people say "you should always try and pay yourself first". The phrase "pay yourself first" generally refers to the idea that when you receive income, you should prioritize saving money for yourself before paying bills or other expenses.
So, let's walk through how you pay yourself first.
Paying yourself first
How you pay yourself first will depend on how often you get paid. Some people get paid every week, others every other week, some twice per month, and others once per month.
| Pay period | Example | Number of pay periods per year |
|---|---|---|
| weekly | every Friday | 52 |
| biweekly | every other Friday | 26 |
| semi-monthly | every 1st and 15th of the month | 24 |
| monthly | every 1st of the month | 12 |
Refer to the table above to see how many pay periods you have in a year. This will help you figure out the amount you need to save each time you receive a paycheck.
Example
For example, let's say you want to save dollar sign, 624 for a new laptop:
- If you're paid weekly, you need to save dollar sign, 12 each time you get paid.
- If you're paid biweekly, you need to save dollar sign, 24 with each paycheck. .
- If you're paid semi-monthly, you need to save dollar sign, 26 each time you get paid.
- And, if you're paid monthly, you need to save dollar sign, 52 each paycheck.
This method works for any savings goal. Let's say you want to save dollar sign, 1, comma, 300 for a vacation and you are paid every two weeks. You would divide dollar sign, 1, comma, 300 by 26 pay periods to get dollar sign, 50 per paycheck. This amount will then be put aside into savings and when the vacation time finally arrives, you will have all the money save up - no stress, no worry.
By syncing your savings with your paycheck, you are able to save money before you get the chance to spend it, thus, pay yourself first.
Want to join the conversation?
What would happen if i were to pay myself last?(18 votes)
That's a worthy question (I've given you an upvote for it.) If you pay yourself last (which means, set money aside in savings or perhaps in an investment), you'll probably end up using all your money on other stuff last. This is the same principle as is often urged on people who make contributions to a religious organization, to make those donations a priority rather than an afterthought.(8 votes)
Wouldn't bi-weekly be twice a week, and semi-monthly be every 2 months?(3 votes)
im in jail for 7 years(9 votes)- 3 hots and a cot for 365 X 7. That'll save you a lot on food and rent!(7 votes)
Isn't using the calculator cheating?(2 votes)
You are using the calculator for yourself. This is not an examination of your personal arithmetical skills. Using the calculator is probably best.(16 votes)
- doesn't bi mean two?(5 votes)
- yes, bi means 2(5 votes)
- What about inflation if lets say you save 1-2years to save up money for something?(3 votes)
- Inflation is part of the world in which we live. Given that prices will rise, you may find it taking more time to save for that thing you want. That's just the way it is.(3 votes)
- What is the best way to get paid?(1 vote)
- The best way to get paid is to get a job with an employer who will pay you.(7 votes)
- Where are you sourcing this savings from the 50/30/20 plan?(2 votes)
- Start from: You are earning a certain amount of money.
THEN: You have a certain amount of expenses.
THEN: Put the expenses into categories, and try to fit them into the 50/30/20 pattern.
IF the 50 isn't enough, maybe you need to earn more or spend less there.
ALL THREE categories are based on what you are earning.(4 votes)
- How should I save if I do not have a stable income? I am sure that I get 300$ as my scholarship and at least 400$ from my parents each month, but overall I can get an extra income of 100$ - 1000$. Are there any techniques to do a proper saving in my case?(2 votes)
- OK. Let's sort this out.
You are a student (that's why you have a scholarship)
I assume that what you receive as a scholarship goes to pay for your schooling. And what your parents contribute goes toward your living expenses. Even if you get as much as $1000 per month on top of that, you hardly have enough to live on. Perhaps, for now, you need to think of things like putting food on the table and keeping a roof over your head, and leave saving for later.(3 votes)
