Savings - Oklahoma Money Matters
Let Your Savings Take Flight
Just for fun, let's play a game called "Would You Rather." Would you rather be given $5 every day for the next 40 years or receive a lump sum of nearly one million dollars 40 years from now? Of course you picked the lump sum, right? These numbers aren't random. If you save and invest $5 a day for the next 40 years at a 10% return rate, you'll have $948,611! That's a nice chunk of change. This scenario sounds like a no-brainer, yet many students put off saving for their future so they can have more money to spend today. Saving money isn't as hard as it seems; it just takes commitment. Below are some tips to help you save money and be well on your way to millionaire status by the time you retire.
Pay yourself first.
One of the most important rules of saving money is making it a priority. Each pay period, have money automatically transferred from your paycheck to your savings account. Direct deposit makes saving simple because you won't miss what you don't see. You'll be amazed how quickly your balance can grow.
Adjust your withholdings.
Make sure your W-4 form is filled out to your best advantage. File a new W-4 anytime there's a major change in your life, like a marriage, birth of a child or purchase of a home, all of which can affect the amount of tax you'll eventually owe. Make sure the money you just spared from the IRS isn't spent; put that extra money into savings!
If you save $30 per week by bringing your lunch to school or work, put that $30 into savings; the same goes for clipping grocery coupons. Like movies? Catch the matinee at discounted prices or subscribe to Netflix and deposit the difference in your savings account.
Reduce monthly fees.
Monthly fees can add up to hundreds of dollars per year. Eliminate services that you pay for but don't use, like premium cable channels, gym fees or warehouse market memberships.
Put away windfall money.
When you earn a raise, get a refund or receive a cash gift, invest the money or put it in your savings account. You know you can get by without it now, so put the money where it can work for you. It will be worth even more later.
Keep making payments.
If you're currently making loan payments, when you've paid the balance in full, use that money to make regular contributions to your savings account or investments. Since you're used to being without the extra money, you won't miss it!
Build an emergency fund.
Stash enough money to cover small emergencies; if you only work part-time, aim for about $1,000. Have a full-time job? Try to stash away three months of living expenses. An emergency fund will provide a cushion for any unexpected situations, so you won't have to rely on credit cards or payday loans.
Keep your eyes on the prize.
Whether your goal is paying next semester's tuition, taking a vacation, buying a car, or making a down payment on a house, remind yourself regularly why you're saving. Post reminders and pictures that represent your goals on the refrigerator for inspiration and congratulate yourself as your bank or investment balance grows.
Saving for School
Saving enough money to pay for higher education can seem overwhelming. Below are two savings options to consider to make this goal attainable and affordable.
Oklahoma's 529 College Savings Plan
The Oklahoma 529 College Savings Plan (OCSP) offers a convenient, flexible savings option. This state-sponsored education savings program is specifically designed to help families save for college.
Parents, grandparents, relatives, and friends can open an OCSP account and contribute on behalf of a beneficiary, regardless of their income level. Funds can be applied toward tuition and other related expenses at eligible educational institutions in the U.S. or abroad. Contributions grow tax-free, are Oklahoma tax deductible up to a certain level, and may be payroll deducted by employers. There's no annual limit on contributions (a lifetime limit per beneficiary applies), and if a beneficiary decides not to attend a postsecondary institution, contributed funds can be transferred to another eligible beneficiary. The OCSP website features a comprehensive program overview, detailed investment options, a 'Frequently Asked Questions' section, and online program enrollment. Check out www.ok4saving.org today!
Coverdell Education Savings Account
A Coverdell Education Savings Account (ESA) is a trust or custodial account created to fund elementary, secondary and college education expenses. Annual contributions grow tax-deferred and are limited to $2,000. Caveats to carefully consider: the amount you can contribute to a Coverdell ESA is determined by your income level, and the funds must be used by the time the student turns 30, or the earnings become taxable and a penalty is applied.
Another important program for families to consider is Oklahoma's Promise. If parents meet certain income requirements and students meet certain academic requirements and stay out of trouble, Oklahoma's Promise will pay tuition at an Oklahoma public two-year college or four-year university. Students must apply in the 8th, 9th or 10th grade, so don't miss out! Learn more at www.okpromise.org.
This information presented in cooperation with Oklahoma Money Matters, the financial education outreach initiative of the Oklahoma College Assistance Program. For more information about OKMM, visit www.oklahomamoneymatters.org or call 1-800-970-OKMM.