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Saving money is not always easy and it can be tempting to put off reviewing your finances for another day. But small improvements to the way you think about saving money today could add up quickly. Before you know it, you may have developed a decent sized emergency fund, raised the money for home improvements, or bolstered your retirement fund.

With these five tips and strategies, find out how you can build your savings, even on a low wage or a fixed income.

1. Get to know your finances

One of the simplest ways to improve your ability to save is to take the time to understand your financial situation in detail. Becoming familiar with your budget will enable you to revise your savings approach and maximize the amount of money that you can save each month.

Track your spending

The first thing to do is work out how much you are spending and on what. In addition to regular expenditures on groceries, rent/mortgage, and utilities, you should also track tips, coffees, and one-off purchases across all your checking accounts and credit cards.

You can use First Merchants’ Household Spending Tracker to better visualize how your monthly spending breaks down.

Review and renegotiate your monthly expenses

Now you know your outgoings you can identify opportunities to save money. Example areas to consider include:

  • Reviewing entertainment and lifestyle subscriptions
  • Renegotiating car insurance
  • Negotiating phone and broadband plans
  • Planning grocery shopping to avoid impulse purchases.

Resist the temptation to dismiss small purchases as not important. By annualizing these, it will quickly become clear that there are savings to be made. Consider how much you are paying for lunch at work – spending just $10 per day could add up to $2,600 across an entire year.

2. Clear high-interest debts

If you have outstanding balances, there is a chance that high-interest payments are draining money that you could otherwise be saving.

Review your financed purchases and credit cards to identify any that can be paid off using a balance transfer offer to reduce interest payments.

With debts cleared or payments reduced, the money that you were spending on interest can now be redirected into your savings.

Use First Merchants’ Credit Card Balance Transfer Calculator tool to estimate the impact of balance transfer fees and find out if the time it will take to pay off the balance can be reduced.

3. Apply a budget rule

Budget rules are an effective way to plan how you will limit overspending and maximize your savings. By splitting your income into percentage-based ‘pots’ you can make sure that a set amount of money is going into savings each month.

These are not fixed rules but guidelines for thinking about how you budget. If your circumstances change or the suggested percentages do not work for you, you can adjust them to suit your needs.

Remember, the intention is to normalize making regular contributions towards your savings – budget rules are about establishing consistency rather than hitting a minimum savings target.

Common budget rules

The 50/30/20 budget rule explained

A popular and commonly used rule for budget planning is to divide your income into three elements:

  • 50% ‘Needs’ – The essentials: Rent/mortgage, food, utility bills, and debt repayments.
  • 30% ‘Wants’ – Important, but not essential: Holidays, entertainment subscriptions, eating out.
  • 20% ‘Finances’ – The remainder of your budget should go towards savings.

On an example post-tax salary of $35,000, this model would ensure $7,000 per year can be put into savings.

The 80/20 budget rule explained

80/20 is a simplified version of 50/30/20, maintaining the same percentage for savings, but not tracking ‘Wants’ and ‘Needs’ separately. This could be useful for those who don’t require a detailed budget structure:

  • 80% General expenditures: ‘Needs’ and ‘Wants’ combined
  • 20% Savings.

The 70/20/10 budget rule explained

Saving 20% of your income is not always as simple as it sounds. If it isn’t possible for you, don’t be discouraged. Saving any amount is better than not saving at all.

The 70/20/10 budget rule shifts the balance slightly, allowing more money for ‘Needs’, cutting down ‘Wants’, and aiming for 10% of your income to be put into savings.

  • 70% ‘Needs’ – The essentials: rent/mortgage, food, and utility bills
  • 20% ‘Wants’ – Important but not essential: holidays, entertainment subscriptions, eating out.
  • 10% ‘Finances’ – The remainder of your budget should go towards savings.

On an example salary of $35,000, this model would ensure that $1,200 per year can be put towards savings.

4. Automate your savings

A great way to make sure you remain consistent with your saving contributions is to automate your regular deposits. This way you know exactly how much is allocated and you can avoid using that money to cover day-to-day expenses.

Treating this deposit in the same way as your other monthly bills in your budget means that you can set it up and then forget about it – safe in the knowledge that your savings are increasing each month.

First Merchant’s Smart Saver CD account is a great way to begin automating your savings contributions. Opening an account on a one-year term requires minimum monthly deposits of just $25, making saving as simple as possible for people on a range of budgets.

Automation can also be used to save money on daily purchases using round-up tools, which have become an increasingly popular savings method. By automatically rounding up your spending to the nearest dollar and putting the excess into a savings account, you can increase the amount you are saving without changing your habits. For example, if you buy something for $4.75, this is rounded to $5 with 25 cents going to savings.

5. Identify your financial priorities

Consider what it is you need to save for. With so many savings products available, knowing the purpose of your savings will make it far easier to identify which accounts will provide the best return for you.

List your goals and sort them into short, medium, and long-term. To get the most out of your savings, you may consider opening multiple savings accounts for these different requirements.

Examples are listed below but check out our article ‘The pros and cons of different types of savings accounts’ to learn more about the different types of savings accounts and their advantages.


Short-term savings often require quick access, such as emergency funds or rainy-day funds. The intention behind these accounts is to build up your savings without sacrificing access or having to pay large fees if you need to make a withdrawal.

First Merchants’ Regular Savings accounts are ideal for short-term savings as they have no minimum opening deposit and offer tiered interest rates based on the account’s balance.


Looking to get a new car in the next few years? Saving for a mortgage deposit? Mid-term savings options are for you - if you have a savings goal that is up to five years away.

Money market accounts (MMAs) offer higher interest returns than standard savings accounts and allow access to your money when you need it, though the number of free withdrawals may be limited.

A Certificate of Deposit (CD) account locks your money away for an agreed period in return for higher interest rates. If you have a set amount of money to put aside, this could be the ideal way to increase your savings compared to leaving the money in a standard account.

A technique to get even more out of CD savings is called CD laddering. Rather than putting your lump sum into one 5-year CD account, split it into multiple accounts, each staggered by a year. This will allow you to benefit from higher interest rates while also having the flexibility to access money without penalties, as one account will mature each year. As interest rates change, you can also move the matured funds into a new saver to benefit from increased rates.


The interest on savings accounts will often reflect a trade-off with the ability to withdraw funds freely. If you can, allowing your funds to be tied into a long-term savings account will result in the highest interest rates.

This approach aligns well with saving for long-term goals such as your children’s education or retirement. Individual Retirement Accounts (IRAs) are a popular option for personal pension funds as they also offer some tax benefits to account holders.

For expert guidance on long-term investments and retirement planning, speak with First Merchants’ Wealth Management team.

Frequently Asked Questions (FAQs)

How much should I save each month?

For many people, the goal for monthly saving should be 20% of your income to create a foundation for retirement and other life events.

Depending on circumstances, this goal could be reduced to something that is more realistic. Remember, any amount saved is a benefit.

What are the disadvantages of the 50/30/20 rule?

The increasing cost of living and high interest rates mean that low-income households may have to spend more than 50% of their income on essentials.

The 50/30/20 rule also doesn't consider higher incomes, who might be able to save more than 20%. If you choose this method, make sure to only use 50/30/20 as a guideline and adjust according to your circumstances.

What are the golden rules of saving?

Effective saving requires three golden rules:

  • Pay yourself first. This will guarantee that funds are added to savings accounts every month.
  • Create an emergency fund. You never know when you will need it, so prioritize this as soon as possible.
  • Save within your means. It is better to make saving a habit rather than waiting to reach a certain level of income before starting.

How can I build an emergency fund?

  • An emergency fund should ideally cover between three and six months of your salary to make sure you are protected should something unexpected happen, such as losing your job.
  • Emergency funds can be built up over time using some of the methods listed above, including automated saving, or setting a 50/30/20-style budget rule.

Build your savings smartly

Making sure that your savings are working for you and your future can be tricky, so let First Merchants guide you. Just give us a call on 1.800.205.3464. Our Customer Service team is available weekdays from 8 a.m. until 8 p.m. ET, and from 9 a.m. until 3 p.m. ET on Saturdays. Or schedule an appointment with a local banker.

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