1. Recognize the difference between necessities and luxuries. It’s often tempting to pick up the latest toys for our children or the most fashionable designer items for ourselves. But these are luxuries as opposed to actual necessities. When we show fiscal self-control, it not only helps our bottom-line, but also teaches our children that money doesn’t grow on trees. Hopefully, we can help our children develop good saving habits by showing them how to live and save by example. Why not make saving money a team effort at home? Open savings accounts for your children so they can deposit monetary gifts from birthdays and holidays, and watch their savings grow.
2. Build an emergency fund and pay yourself first. While this may sound simple, it is easier said than done. Save a small amount of money right off the top of your regular income. Whether you put aside $10 or $100, don't touch those savings. Keep it aside for emergencies so you don't use credit cards and pay interest. Emergencies include medical expenses, automotive repairs and house repairs – not an impromptu trip to Europe or new outfit on sale.
4. Invest your long-term savings. We all want to see our money grow. The best way to do this is to funnel long-term savings into a diversified investment portfolio comprised of different asset classes. Invest in equities through no-load low-cost index funds and ensure that other asset classes are well-represented in order to manage your risks. Based on your risk profile and age, you may want to include bonds, cash, real estate or even precious metals to your holdings, along with your core portfolio of equities. You may want to start your investment program by funding your retirement accounts first!
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