Here’s why strategic saving is the first step to financial freedom

Saving your money is the first step to financial freedom. But beyond simply saving, you need to save strategically. On today’s episode of Money with Marsai Martin, Martin speaks to financial activist and founder of The Broke Black Girl, Dasha Kennedy (@thebrokeblackgirl), about the concept of saving money, why you need to save, and how to get started. 

First thing’s first: what does it mean to save money? Kennedy believes that a lot of people have a misconception that as long as they’re not spending money, they’re saving money. “That’s really not the case,” Kennedy says. “Saving is not the absence of spending.” Instead, it’s “giving your extra money something to do.” By this Kennedy means that if you have some extra money leftover at the end of the month, you can put that money aside with the intention of using it at a later point for a specific purpose. “It really could be anything,” she says. “Your relocation fund, your entertainment fund, any type of savings,” shares Kennedy. 

This brings Martin to her next question, which is what are all the different types of savings accounts a person can have, and what do those accounts do? 

Kennedy responds by breaking down a handful of important types of savings accounts people should be aware of. First is a traditional savings account, “which is just a savings account that you can open up with the bank. In many cases it has less to no types of interest that you can gain,” explains Kennedy. 

Then Kennedy outlines a high yield savings account, “which is similar [to a traditional savings account] but a little bit different from your traditional savings account because it does gain interest.”

Next, Kennedy explains health savings accounts, “which is tax free money that you can save in an account that you can use for medical expenses.” 

Finally, the financial expert delves into 401Ks and IRAs. A 401K, Kennedy explains, “is usually associated with your employer. It’s a retirement plan. It allows employees to save money and invest in their retirement.” Meanwhile, an IRA is similar to a 401K, “but it’s usually associated with entrepreneurs, freelancers, and people that are self-employed. And it’s a tax advantage account that individuals use to invest in their retirement,” says Kennedy. 

While saving money is important business, it doesn’t have to be all serious. Martin inquires about how one can still have fun and buy what they want while saving money, which are things that don’t have to be mutually exclusive, according to Kennedy. “I have a savings account that’s my ‘Turn Up’ account,” Kennedy shares. “So I can take money from that account, I can go out with my friends, I can party, I can enjoy myself, and I don’t have the weight on my shoulders that maybe I’m dipping into my rent money. I don’t have that on my shoulders because I’ve been saving in this specific account for that reason.”

After discussing various aspects of saving, Martin asks what the difference between saving and investing is. Kennedy explains that saving is putting money aside for a specific goal, while investing is putting your money into something specific with the expectation that its value will grow over time. “With investing, it’s a waiting game,” Kennedy says. “You’re putting money there, you’re not really in a rush to see a return on it because you know it might take some time for this money to grow. This is money that you’re OK with taking a risk. You may lose it, it may grow, it may increase.”

Now that the concepts of saving and investing have been broken down, Martin asks how to keep track of one’s savings progress. Kennedy explains that it depends on the person because while there are a ton of apps that can help with budgeting and saving, using an app can open you up to being distracted by your phone. So Kennedy keeps it old school with Microsoft Excel sheets. “It keeps me involved,” Kennedy says. “It actually has a new tool called Money in Excel and it allows you to connect to your bank account. So it will pull all of your transactions right from your bank account and do most of the calculations for you.”

Finally, Kennedy leaves us with some words of wisdom when it comes to saving money. “If you are wondering when to start saving: today,” insists Kennedy. “Today is the day. Don’t waste another day. The advantage that most young people have is time, and it’s on your side.”

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