How to Start Saving Money

Benjamin Franklin said a penny saved is a penny earned in 1737. In 2025, the U.S. Treasury would stop producing pennies. That was fitting considering how difficult it can be to save money these days.

Almost half of U.S. households don’t have $1,000 in emergency savings.

But even in tough times, you can still save money. Here’s how to do it.

Foundational Steps to Start Saving Money

Before you start saving money, you must know where you’re spending it, so the first thing to do is track your expenses.

List everything you spend money on – mortgage, rent, car payment, insurance, groceries, utilities, gas, Netflix, opera tickets, Starbucks, you name it. There are apps that can make the job easier. Some of them can even get the info from your bank account and credit cards.

Taking inventory of your spending is Step No. 1 in your savings journey. Step No. 2 is to establish short-term and long-term goals. That gives you something tangible to motivate you during the process.

Short-term goals are things like establishing an emergency fund, paying down high-interest credit cards, and saving for a vacation.

Long-term goals are funding a retirement plan, buying a house, paying for your kids’ college, and buying investment properties.

Step No. 3 is to tailor your savings to the 50/30/20 Rule. That means 50% of your income should go to essentials. Those are non-negotiable needs like utilities, food, clothing, transportation and having a roof over your head.

Thirty percent of your income should go to discretionary spending. Those are things you enjoy but can live without, like hobbies, streaming services, dining out, car washes and Swedish massages. The remaining 20% should go to creating an emergency fund, investing in retirement, or paying down credit cards and other debt beyond the required minimum monthly payment.

Step No. 4 is to set up automatic payroll deductions or bank transfers. That will send money directly to your creditors before you have a chance to spend it. Always pay off your needs before spending money on your wants.

Strategic Debt Management to Accelerate Savings

As bad as debt can be to your saving plan, it’s made worse by the interest charges, primarily for using credit cards. For instance, the U.S. Treasury paid $970 billion in interest charges in 2025.

Fortunately, no consumers are $38 trillion in debt like the U.S. But interest rates still eat up a huge chunk of potential savings. The average rate on a credit card in mid-2026 was 25.3%. The average interest rate on a personal loan was 12.3%. For a used car loan, it was 11.3%.

You could try to pay those charges down willy-nilly, but it’s more effective to have a strategy. The most common ones are the snowball and avalanche method.

With the debt avalanche, you try to pay off the credit card debt with the highest interest rate first, while making minimum payments on other cards. After paying off the debt with the highest interest rate, you tackle the second-highest rate and so on down the list.

It makes mathematical sense to pay off a credit card with a 29% interest rate before paying off one with a 17% rate. But the avalanche does not necessarily make the best psychological sense for some people.

That’s where the snowball method comes in. With that, you pay off the smallest debt first regardless of the interest rate, while making minimum monthly payments on your other cards. When the lowest debt is paid, you move up to the second smallest debt, and so on up the list.

The theory is that the quicker gratification of paying off one debt will build momentum. Before you know it, the snowball will be rolling. You’ll be more likely to stick to a plan and escape all your debt.

Whether you choose the avalanche or snowball, you should monitor interest rates. As they fluctuate, you might be able to refinance a loan or switch to a credit card with a lower rate.

Saving for Major Life Milestones

When it comes to life milestones, there aren’t many bigger than retirement. Unfortunately, a lot of people aren’t financially prepared for it.

About 42% of Americans haven’t saved enough to retire comfortably. “Comfortably” is a relative term, but financial experts say most people will need at least $1.3 million to foot that bill.

You need to set up a retirement plan and start early. If you start at age 25 instead of 35, the compounded interest on investments could add up to hundreds of thousands of dollars in your retirement pocket. That would pay for a lot of Metamucil.

There are plenty of plans out there, starting with a 401(k). In it, tax-deferred money is deducted from your paycheck into a savings account.

Not only is that money not immediately taxed, but employers also often match your contribution, up to a plan-specific limit.. That’s truly free money.

You can also set up an Individual Retirement Account (IRA) or Roth IRA with a financial institution. With a Roth IRA, contributions are with after-tax dollars, so you won’t be taxed when you withdraw them in retirement. Traditional IRAs use contributions that aren’t taxed, so you’ll pay the IRS when the money is withdrawn.

How to Start Saving Money for a House

Another major life milestone is buying a house. As with retirement, coming up with a plan to get a mortgage you can afford is vital.

The first goal is to be able to put down 20% of the purchase price as a down payment. The median home price in the U.S. was $405,000 in March of 2026, meaning you’d need $81,000 to make a 20% down payment.

That’s a big chunk of change but having it will all but guarantee a bank or other financial institution will give you a mortgage. More importantly, you won’t have to pay Private Mortgage Insurance (PMI). That’s usually 1% of the loan amount. A PMI payment on a $405,000 house would be about $400 a month. Ouch!

Some government-backed loans offered by the FHA and VA don’t require such large down payments. But remember, the sale price of any house doesn’t include a glut of fees and other closing costs that can add up to 6% to the total bill.

Whether you’re buying a penthouse on Fifth Avenue or a double-wide in a trailer park, a mortgage will likely be the biggest expense in your life. The sheer length of payments (typically 30 years) can be sobering.

You can look at visual trackers on your lender’s website or make your own chart. That might help keep you motivated. And remember that a house isn’t just a monthly expense. It’s a long-term investment.

There’s no guarantee, but the money you pay every month will likely come back when you sell the house. Historically, home values increase by about 1%-3% a year. That makes a mortgage a savings plan unto itself.

How to Start Saving Money for a Car

Buying a car isn’t exactly a life milestone, though the average American will buy 8-10 of them in their lifetime.

It may not be a major milestone, but a car purchase still takes planning. You should decide what you can spend and set a timetable to save enough money for making the purchase.

When it comes to determining a price, apply the 20/4/10 Rule. First, aim for a 20% down payment. Second, try to get a loan term of four years or fewer. Third, make sure the total cost of the car (payment, insurance, gas) is no more than 10% of your monthly net income.

For instance, if you bring home $4,500 a month, your monthly car expenses should not exceed $450.

Once you have that plan in place, shop around. The eternal question is New vs. Used? Each has pros and cons, though it always pays to remember that a new car depreciates about 10% when you drive it off the lot.

Where to buy is another consideration. A car dealership offers more security, but buying from a private owner will save you hundreds of dollars in fees.

Lifestyle Adjustments and Quick Wins

Big-ticket items like a house and car require a lot of planning. But how you handle the daily nickel-and-dime stuff can make or break a savings plan.

Be guided by the 30-Day Rule. Unless it’s a necessity, wait 30 days to buy an item. That will eliminate impulse buying.

After that, there is a vast range of money-saving moves you can take. Start with subscriptions.

The average American has about 10 of them and spends about $220 a month, according to a CNET survey. You can probably get by without so much streaming and food delivery services. Among other money-saving strategies:

• Set up automatic deposits and bill payments. If bills are automatically paid from your bank account, you won’t risk late fees. If you automatically deposit money from your paycheck into your savings account, you won’t miss it.
• Reduce restaurant spending. The average meal is about three times more expensive at a restaurant than if you’d prepared it at home, according to the U.S. Bureau of Labor Statistics.
• Conserve energy. Ease up on the air conditioning/heating. Weatherproof your house. Use LED light bulbs.
• Use cash. Psychologically, you’re less likely to buy something if you pay in cash than if you use a credit or debit card.
• Donate plasma safely. It’s not for everyone, but you can earn up to $400 a month.
• Buy in bulk. It costs about $65 a year to join Costco or Sam’s Club. You’ll probably save money in the long run if you buy non-perishable items in bulk at such stores.

As you check out of Costco with a 44-roll pack of toilet paper, remember that cutting expenses is just one part of your saving strategy. You need to set goals, get a plan, and stick to it.

Pennies may be going extinct, but there will always be ways to save money.

Frequently Asked Questions About How to Save Money

What is the first step to saving money?

The first step is to track where your money is going. List your regular expenses, such as housing, transportation, food, insurance, utilities, subscriptions and debt payments. Once you can see your spending clearly, it becomes easier to find places to cut back. Tracking expenses also helps you set realistic savings goals instead of guessing how much money you can afford to save.

How much money should I save each month?

A common guideline is the 50/30/20 rule: use about 50% of take-home pay for needs, 30% for wants and 20% for savings or extra debt payments. This rule may not work perfectly for every household, especially when income is tight or expenses are high. If 20% is not realistic, start with a smaller amount and increase it when your budget allows.

Should I save money or pay off debt first?

It depends on your debt, interest rates and emergency savings. High-interest debt, especially credit card debt, can make it harder to save because interest charges grow quickly. At the same time, having no emergency savings can push you back into debt when unexpected expenses happen. Many people try to build a small emergency fund while also making steady payments on high-interest debt.

What is the best way to build an emergency fund?

Set a specific goal and automate contributions if possible. Start with a small target you can reach, then work toward covering several months of essential expenses over time. Keep emergency savings in a separate account so it is available when needed but not too easy to spend. Even small automatic transfers can build momentum when they happen consistently.

How can I save money for a house or car?

Start by setting a target amount and deadline. For a house, plan for the down payment, closing costs, moving expenses and ongoing costs such as maintenance, insurance and property taxes. For a car, consider the down payment, loan payment, insurance, gas and repairs. Breaking a large goal into monthly savings targets can make it easier to stay on track.

What are simple ways to save money quickly?

Look for expenses you can reduce right away, such as unused subscriptions, frequent restaurant meals, delivery fees, impulse purchases or high utility costs. Setting up automatic savings, using low-balance alerts and waiting before making nonessential purchases can also help. These changes may seem small, but they can free up money for emergency savings, debt repayment or longer-term goals.