Practical Strategies to Build Better Financial Habits

Key takeaways

• Saving money creates positive financial habits, avoids further debt and prevents impulsive reactions to markets.
• Building an emergency fund should be a top priority when saving money.
• Creating goals, building a budget, automating savings and using high-yield savings accounts are important steps for success.

We learn from the very first time we put our earnings into a piggy bank that saving money is important. Whether you’re just starting your career or in retirement, saving money helps protect your finances and allows you to take care of both needs and wants. However, it can be a hard habit to build—no matter your income. Three finance experts share how to save money and develop healthy financial habits that last.

Why saving money matters

Saving money sets your future self up for success and creates a safety net for unexpected events. With intentional saving, you can make a large purchase, fund a child’s education, travel the world and prepare for retirement. Most importantly, it helps you avoid debt and provides peace of mind, allowing you to make proactive and thoughtful financial decisions. 

“Think of saving money as freedom and flexibility,” says Dr. Preston Cherry, CFP and founder of Concurrent Wealth Management. “That will create the desire to prepare yourself and stay with it no matter the income level.”

How to save money: 6 strategies to help you succeed 

1. Set your savings goals

“[Some people] say, ‘I just want to save more money.’ Well, that’s not really a goal because there’s no finish line,” says Kumiko Love, accredited financial counselor and bestselling author of “My Money My Way: Taking Back Control of Your Financial Life.”

Love encourages her clients to get specific with their savings goals, including identifying the purpose for saving, amount needed and due date. “A specific goal gives your savings a purpose,” she says. “And that purpose not only makes it easier to stay motivated, but it helps you figure out how to include it in your budget.”

2. Create a budget that supports your savings goals

“A budget is just a clear spending plan. That’s all it is. It’s deciding in advance where money is going instead of wondering where it went after the fact,” says Love.

A budget should consist of your fixed expenses, like debt payments, mortgage and utility bills, and variable expenses, like groceries, pet expenses and personal care. It should also include your savings. That way, you’re paying yourself first, something Cherry says is a must when it comes to setting yourself up for success. “If your current self is underfunded, you’re going to feel unfulfilled and not stick to your financial plan,” he says. 

Love recommends treating your savings like a bill in your budget, something that you need to pay. “We don’t usually ask ourselves whether we feel like paying the electrical bill or a car payment, we plan for it. We put it in the budget. Savings deserve the same level of importance,” she says. 

3. Use high-yield savings accounts to grow your money

Traditional checking and savings accounts have rates that are significantly lower than other deposit accounts. According to the FDIC’s June report, the average rate for a traditional savings account is 0.38%, while the average checking account is 0.07%. While these accounts do serve their purpose, you might want to consider storing some of your savings in accounts that earn higher yields. 

“Think of a primary checking account as your operating account,” says Shaun McDougall, head of consumer banking at First Horizon Bank. “That’s where your money comes in, comes out and where you pay your bills. That’s your day-to-day account. When you think about saving, you don’t necessarily want it easily accessible, and you want it somewhat separate [from your checking account].” 

Putting savings in separate accounts with higher yields and FDIC insurance helps keep money safe because it’s separate from your spending money, less accessible, protected up to $250,000 per account and is able to grow over time. “Growth is the key,” says McDougall. 

The account you choose will depend on whether you have short- or long-term goals and whether you’ll need access to the money right away. The following options are offered by most online banks, credit unions and other financial institutions: 

High-yield savings account

As of June 2026, the best high-yield savings accounts have APYs as high as 5%—more than 10 times the average rate of traditional savings accounts. Many high-yield savings accounts don’t allow ATM withdrawals and don’t come with a debit card, making it harder to spend the money. However, you can transfer money in and out of the account at any time, so it isn’t as “locked up” as it would be in a certificate of deposit (CD).

Certificate of deposit 

CDs hold your money in an account for a fixed period of time, during which you can’t withdraw the funds without paying a penalty. In exchange for keeping your money on deposit, you can often earn a higher APY, typically around 4% depending on the CD. Currently, some of the top-earning CDs are averaging 4.31% APY, according to DepositAccounts.com. CDs come with several term options, usually from one month to five years. If you withdraw money before your CD matures, you’ll likely pay a fee. If you don’t need to access your savings right away, a CD removes the temptation to use those funds for everyday purchases.

Money-market account

A money-market account works like a checking account, but typically has a higher yield. It’s a deposit account that allows you to withdraw money when needed and often comes with checks or debit cards, something many high-yield savings accounts don’t have. This can be a good option for an emergency fund, according to McDougall. With the top 1% earning an average of 3.60%, money-market accounts don’t have as competitive of rates as other options, but might provide more access to your money than a high-yield savings account or CD, which could make them a good option for short-term savings goals.

In a proprietary WSJ Intelligence study of n=265 readers, 68% of respondents said that interest-earning potential is the biggest motivator when opening a savings account. If earning a higher interest rate is important to you, you might want to consider moving your funds to one of these accounts.

4. Reduce unnecessary expenses

Reducing what you spend in certain categories allows you to increase what you put toward your savings. Any money you cut from unnecessary spending can be allocated to savings instead. For example, if you reduce your entertainment or clothing budget by $50 each month and put that money in a sinking fund—savings set aside for a specific purpose—you’d be able to save an additional $600 in one year.

While no-spend days are popular on social media, Love warns “their primary focus is on restriction and not habit change.” Instead, she recommends participating in savings challenges that create small wins and build consistency over time.

5. Automate your savings

Love credits automation for removing some of the decision fatigue that comes with saving money. Many banks allow you to automate your savings so that on a certain day or schedule, your bank automatically moves money from your checking to your savings. You don’t even have to think about it or remember to do it. If you set your automatic savings on your payday, you might not even feel impacted by the money leaving your account because it might already be transferred before you check your balance.

Consider what else might be automated. Do you have subscriptions or memberships that you’ve forgotten about simply because they’re on autopay or autorenew? Those costs can add up over time.

6. Build an emergency fund

An emergency fund provides easy-to-access cash that can cover unexpected expenses, such as a medical bill, major car repair or job loss. 

“You don’t have to wait for uncertainty,” says Cherry, who encourages clients to think of emergency funds as event readiness funds. He says that by viewing it as money you put away for events you’re ready for—both positive and negative—you move away from fear-based saving and focus on proactive saving instead. Building this fund helps you avoid going into debt or drawing from other savings when you need to pay a large expense right away. It also keeps you from reacting to external events that are out of your control. That includes making rash decisions on investments when the market turns.

Most experts, including McDougall, recommend you save three to six months’ worth of expenses in your emergency fund. If that seems impossible, start with one month, $1,000 or the amount of your insurance deductible. If you can comfortably save that much, consider raising your goal amount. With AI causing mass layoffs and job uncertainty, Cherry recommends saving nine to 18 months of expenses if you’re able.

Common mistakes that make saving harder

Even if you followed all the right money-saving strategies, you could still come up short of your goal by making these common mistakes:

Over-complicating your finances: “I see people with dozens of budget categories and sinking funds that they’re trying to save for in eight different bank accounts,” says Love, warning that over-complicating your finances can make it harder to stay consistent. Having too many savings goals, opening a ton of different accounts or using various banks can make it hard to track your progress, cause confusion or miscalculation and lead to burnout. Consider starting with only a couple savings goals and using the same bank for different accounts, where you can keep track all in one place.

Lifestyle inflation: This happens when your spending increases with your income. Instead of changing your lifestyle, maintain the same budget and put your extra funds toward saving. 

Emotional spending: If you rely on making spontaneous purchases to improve your mood, resist storing your credit card info online. You can avoid overspending by removing the convenience of online shopping and giving yourself a cooling-off period before purchasing an item, especially if you’re feeling sad, angry or stressed. 

High-interest debt:“High-interest debt makes it so much harder to build wealth because so much of your money is going toward interest,” says Love. If you’re able to, consider balancing your savings goals with an aggressive debt paydown strategy like the debt snowball or debt avalanche method.

What is the fastest way to save money?

“You have to increase the gap between your income and your expenses,” says Love, noting there are two ways to do that: making more money and/or spending less. You can do either or, for even faster results, a combination of both. You might be able to increase your income by asking for a raise, working overtime, selling items or taking on a second job or side hustle. You could also add money to your savings immediately through a windfall such as a tax return, monetary gift, end-of-year bonus or inheritance. 

How much money should I save each month?

Your savings amount depends on your income and your financial goals. Many experts recommend saving around 20% of your take-home pay. However, you should adjust that amount based on your financial situation, including your living expenses and debt. What’s more important than the amount is that you start, says McDougall. “The earlier you start, the better,” he says. “[Even] $25 every couple of weeks makes a huge difference. You don’t need ‘perfect’ to make progress.”

Love points out another benefit of starting small. “We underestimate the psychological power of saving even small amounts,” she says. “Saving $25 or even $15 might not seem life-changing, but it proves that you are capable of saving.” 

Where should I keep my savings?

To make the most of long-term savings, you’ll want to keep the money in an account that earns a higher yield than a normal savings account. If you want access to that money at all times without penalty, you might want to keep it in a money-market account or high-yield savings account. If you don’t need the money right away, a CD could be a better option. For a shorter-term option, consider a six-month CD, with an FDIC national average rate of 1.38%, though some can go higher than 4%. If you won’t need the money for quite some time, a five-year CD can earn a national average of 1.35% APY or, at some banks, higher than 4.25%.

Should I keep saving money in retirement?

Retirement is the time you start drawing from certain savings, including your 401(k), IRA, pension, investments and your personal savings. Whether you should keep saving depends on your financial situation and how well you’ve implemented your retirement strategy. If you have a healthy nest egg that can adjust for inflation and allow you to live comfortably, an emergency fund to support you through unforeseen costs or bad markets, and a plan for medical expenses, you might not need to save heavily. However, if you want to travel more, make a large purchase, support family members, leave money for your loved ones or better prepare for medical costs or long-term care, you may want to continue saving or move money into accounts with higher yields.

Lauren is a staff editor at Buy Side, focusing on the many facets of personal finance.