A Little Savings Goes a Long Way

It’s your money. You work hard and I’m not here to tell you how to spend it. But I am here to suggest some small changes that could, over time, increase your savings by tens, even hundreds of thousands of dollars. These are things you may not have thought much about because they seem so minor. Yet they could dramatically improve your ability to fund your kids’ college education, as well as the quality of your lifestyle in retirement.

Here’s a real life example. I’m meeting with a colleague and struggling to figure out what was different about him. Then it hit me – the soda can, which I thought had been surgically attached to his hand, was gone, replaced by a water bottle. It turns out his wellness coach thought he’d benefit from moderating his soda intake and drinking more water.

A couple of months later he shares a revelation. “I’m still drinking soda, but only about half what I used to. It never occurred to me how much I was spending on my caffeine fix.” He kicked himself a couple times, but then moved to the positive. “This ended up being a pretty painless way to add to my daughter’s college fund. I’m saving about $3 a day, which adds up to $20 per week, and $1,000 over the course of a year.”

Over 10 years, assuming an average annual return of eight percent, that translates into an extra $15,000.[1] This made me think about other modest changes that could have a big impact on savings. It also made me think about America Saves Week (Feb. 24 through March 1, 2014) and all the good work being done to develop financial action strategies to help Americans save money, reduce debt and build wealth.

In the spirit of the week, I did some research. It turns out the average American eats out nearly five times per week.[2] This may or may not sound like much, given the number of families in which both parents work, until you multiply the number of outings by 52 weeks, then again by the number of family members.

Based on a family of four, it adds up to approximately 1,000 restaurant meals per year. Assuming you can save $5 per person per meal on average, by eating at home or brown bagging it, and assuming that family could eat out four times per week instead of five, there’s another $1,000 saved. That’s less than $3 a day in savings, but over the course of a year, it really adds up.

As America Saves Week urges, the key is to start small, make a plan and take action. Move the focus away from the large dollar amounts you need for things like retirement or college. Instead, focus on just how little you need to save, each day, if you give yourself a long time horizon.

I believe for most of us, the thought of trying to save a half million dollars for retirement is extremely daunting. Yet if you can save $5 a day, 365 days a year, over 40 years you can do just that.[3] As a daily goal, it just seems a lot less intimidating.

In my view, it boils down to establishing a habit of savings – paying yourself first. Depending on your life stage, that could mean putting money aside for an emergency fund, a down payment on a home, college savings, retirement, or some combination of these.

No one should have to give up the things that make life enjoyable. But again, a little moderation can go a long way. If you’re not already doing it, just switch things up a bit. Every once in a while: rent a movie; borrow a book; clip a coupon; make your own coffee; buy in bulk; use a generic; carpool, walk or ride your bike. And don’t forget to drink your water.



[2] Americans eat out about 5 times a week, United Press International, September 19, 2011, based on LivingSocial Dining Out Survey.


[3] Calculated at http://cgi.money.cnn.com/tools/savingscalc/savingscalc.html, assumes average annual return of eight percent.


  • Ashley

    Great article. I completely agree and have applied this savings logic as far back as I can remember. I believe I was about 12 years old when I was attempting to persuade my grandmother to quit smoking. I started with the cost of smoking per day, per month, and then per year. Then I listed off the numerous other things she could buy with that money. The argument didn’t convince grandma to quit, but the mentality stuck with me. Do I love the taste of a 5 dollar coffee from Starbucks? Absolutely. Would I rather have one every day as opposed to going on a vacation? Absolutely not. In my opinion, the payoff of watching my 401K grow, paying down my student loan debt, or traveling, is much more satisfying than instant gratification.

    • Dan Houston, President – Retirement, Insurance & Financial Services, the Principal Financial Group

      Hi Ashley — Thanks for sharing your philosophy, and providing some great examples of the benefits of re-thinking how we spend money.

      • David

        My family and I have done the same, eating out once or twice a month and paying ourselves first. If its not available to spend, then you just can’t… We are big on wants and needs and have everything we need, but not everything we want. Like a friend of mine stated, “having things is nice, but having a retirement is better.” He also makes comment to how the “Jones” may be broke and living on credit. Food for thought. Also, I have learned some key knowledge from currently retired individuals. Don’t be afraid to ask an elderly person who is comfortable in retirement how they did it, they are living proof it can be done. Best regards.

    • Dan Houston, President – Retirement, Insurance & Financial Services, the Principal Financial Group

      David — Great points, as well. Thank you. I’ll echo your last one — it can be done. It just takes some discipline and initiative.