How to become a saver

There's a new generation of savers in America, according to several recent studies by the banking industry.

Millennials, those mostly 30-somethings so-named because they entered adulthood right around the year 2000, want to save. They realize they need to save and in many cases have begun to do so.

This is the generation of student loan debt. This also is the generation that ran smack dab into the Great Recession not long after they entered the workforce. Not surprisingly, their trust of big financial institutions has waned.

Indeed, this generation has had more than its share of wind in its face when it comes to personal finances. But some of those difficult experiences are prompting millennials to put more emphasis on traditional savings tools.

Those tools include certificates of deposit. CDs are term contracts in which a bank commits to a pay a higher rate of interest if the depositor commits to a longer period of time. CDs are insured and the interest payment is guaranteed.

They're safer than the stock market, and your return on investment is certain. They never lose value and some banks will even increase the interest rate during the term of the certificate. This reduces the investor's interest rate risk.

To anyone taking a new look at savings, I say congratulations. The question is not whether to spend or to save but how to do both in balance. Maintaining healthy personal finances has always been about striking the proper mix of spending and saving and finding the right tools to accomplish financial goals smartly and efficiently. The goal, after all, is to constantly grow your personal net worth.

You don't have to start your savings plan with a large amount. I suggest starting small. Open an account at your local bank that pays interest and won't eat up your balance in fees. A traditional savings account is a good option. But a CD is worth considering also, for the reasons already mentioned.

Consider adding to your savings with regular automatic withdrawals from your checking account or, better yet, directly from your paycheck. Most employers allow you to directly deposit a portion of each paycheck into a savings plan.

If you never see the money to begin with, chances are you won't miss it. And you will quickly build up a savings balance that will allow you to join the new generation of savers. Even saving $50 or $100 a month is plenty to get started. The point is to get started.

Saving for retirement through a 401(k) program at work also is a great idea, especially if your employer has a program to match your contributions. An Individual Retirement Account, or IRA, is another way to build a retirement nest egg. I also advise anyone struggling with debt to get that under control as a first step in a smart savings plan.

In all of this, the encouraging news is that more Americans, including the generation of millennials, recognize the importance of saving and want to save more. My advice is to create a plan, start saving and stick with it.

You'll be surprised how quickly you'll become a saver.

Pullquote:

The question is not whether to spend or to save but how to do both in balance.