Effective Strategies to Encourage Saving in Others

Two young adults speaking with one another

It may be challenging to watch someone close to you live a lifestyle in which saving money isn't a priority, especially when you're careful about your finances. Although it's not necessarily your responsibility to guide the individual through the process of setting up a savings account or retirement plan, your reasons outlining the benefits of these practices may spark change in the person.

Discussion Approach

The approach you take to persuade someone to save money depends on your relationship with the person. Find a quiet time to speak to the person and share your concerns that she's not saving enough. Offer assistance in exploring the saving avenues that are best for her, or direct her to a bank's financial adviser. During your conversation, clearly outline some key reasons to save. With a child or teenager, express the importance of saving for future expenses such as buying a vehicle or going to college.

Compounding Interest

A key benefit to saving as early as possible is the rate at which interest compounds, provided the money is in a high-interest account. Over multiple decades, five figures in the bank can turn into six or seven figures -- but the money needs this amount of time to grow. If you don't start saving until late in your work career, your money won't see significant growth by the time you retire and begin needing what you've saved. Explore venues other than savings accounts; a certificate of deposit is a form of risk-free savings that may yield a higher interest.

Matching 401(k) Contributions

Many businesses contribute to your 401(k), which is ideal if you don't earn a high salary and saving money is challenging. Although every company has a different plan, some companies contribute 50 cents for every $1 you contribute to your plan. If you plan to stay with a certain company for a long period, you might amass tens of thousands of dollars in money from the company.

Big Purchases and Emergencies

Although saving money for retirement is a good idea, maintaining a savings account may provide a financial buffer for large purchases such as buying a home or vehicle. Saved money is valuable around the holidays as you can buy gifts without having to rely on a credit card. Having money stashed away also is important in the event of emergencies such as an unexpected home repair or time off work because of a medical issue.