Saving Money in 2016: Where to Start

The New Year is upon us. What are your New Year’s resolutions? Eat healthier? Read more? Spend more time with friends and family?

Perhaps you’re looking to save for the short term or invest for the long term more of your hard-earned money. Every year, one of the most popular New Year’s resolutions for Americans is to spend less and save more. However, you may find it easier to save money if you have a plan for that extra cash.

“It’s admirable that people want to save more money as we enter the New Year, as doing so can set yourself up for long-term financial success,” said Joe Correnti, senior vice president of brokerage product at Scottrade. “If you’ve chosen to commit to saving extra money, there are many different options available to help.”

As a starting point, you should consider a short-term or rainy day fund. A rainy day fund can be critical because nothing can ruin your long-term plans faster than a short-term need that you can’t meet.  

A 2015 Federal Reserve report noted nearly half of Americans (47%) couldn’t cover a $400 unexpected expense without having to borrow money or sell possessions. If you’re lacking money to comfortably deal with an unexpected expense, you may want to build an emergency fund. Consider putting this money in a place that’s liquid, or easily accessible.

Once you’ve built up the rainy day fund, you can turn to longer-term investment goals. You should remember that unlike a rainy day account, it can be difficult to quickly get funds from long-term investment accounts. Here are a few you can consider:

IRA and Roth IRA:  Saving as much money as possible now could reap significant benefits when you retire. In addition to retirement vehicles your employer may provide, you can contribute to either a Traditional IRA or Roth IRA, each of which has potential tax advantages. See IRS contribution limits for both types of IRAs, which are offered through Scottrade.

Not sure about the differences between a Traditional IRA or a Roth, and which might be better for you? Check out a general overview of each account type.

Education savings:  College costs in recent decades have exploded far faster than inflation, and there’s little evidence they will be slowing soon. About 71% of the class of 2015 graduated with student loan debt, with the average debt load creeping above $35,000, according to Edvisors.

There is little evidence showing that college costs are slowing. So if you don’t want your child coming out of college with soul-crushing debt, consider socking money away in a Coverdell Education Savings account or a 529 plan to help with education expenses. Scottrade has a variety of plans available to help offset your children’s anticipated college costs.

Taxable accounts: Perhaps you’re looking to actively trade, or looking to build wealth for reasons other than retirement or college savings. If so, you may want to consider opening a traditional trading account with Scottrade. If you choose to open an account with us, we provide a suite of services to help you meet your financial goals.

Question: Have you made it a priority to save more money this year? If so, where do you plan to dedicate these extra resources?

Read next: How Many Investment Accounts? Let Your Plan Be Your Guide

The information and content provided is for informational and/or educational purposes only. The information presented or discussed is not, and should not be considered, a recommendation or an offer of, or solicitation of an offer by, Scottrade or its affiliates to buy, sell or hold any security or other financial product, or an endorsement or affirmation of any specific investment strategy. You are fully responsible for your investment decisions. Your choice to engage in a particular investment or investment strategy should be based solely on your own research and evaluation of the risks involved, your financial circumstances, and your investment objectives. Scottrade, Inc. and its affiliates are not offering or providing, and will not offer or provide, any advice, opinion or recommendation of the suitability, value or profitability of any particular investment or investment strategy.

More Articles & Insights

Budgeting: Building a Plan for Your Finances

Budgeting can help keep you out of financial holes and help ensure your money is spent in ways worthwhile to you.

Save for a Rainy Day: The Importance of Emergency Funds

An emergency fund can help you weather life’s unexpected costs while maintaining your financial health.

Compounding: How Savings and Time Can Add Up

Compounding offers the opportunity to help you build wealth, or, if you’re not careful, can lead to significant financial problems.