Savings are an essential foundation for any financial plan, offering numerous benefits that help with short-term stability and long-term security. The advantage of saving isn’t just that it helps you have money for emergencies; it also opens doors for investment, reducing debt, and achieving financial independence.

Having a savings buffer provides peace of mind and prepares you for unexpected expenses. It also helps you reach major goals such as buying a home, funding education, or planning for retirement.

In today's article, we'll explore everything about savings, practical ways to save money, and various tips to help increase your savings.

What Are Savings?

Savings are the money left over after a person covers their essential expenses within a specific period. In other words, savings represent the net surplus that remains with an individual or family after fulfilling all obligations and spending. Savings are typically kept in forms like cash or its equivalent, such as bank deposits or certificates, which carry no risk of losing money, but also offer very low returns.

However, savings can grow more if invested, but that involves taking some or all of the money at risk to achieve a higher return.

Savings are often designated for emergencies. For example, if Mohamed's monthly salary is 10,000 EGP and his monthly expenses include 450 EGP for electricity, 200 EGP for water, 600 EGP for credit card payments, 2000 EGP for groceries, 500 EGP for mobile bills, and 2000 EGP for fuel, his total expenses would be 5750 EGP.

In this case, Mohamed would have a surplus of 4250 EGP that he can save. By maintaining this saving habit, if an unexpected crisis arises, he will have money to rely on until the problem is resolved.

Types of Savings

In the world of savings, the most basic and common method is saving money as cash, such as in bank deposits. This is the ideal option for many as it’s a safe, risk-free way to store money. However, there are other types of savings or savings accounts that can offer higher returns over the long term. Let's explore these:

- Savings Accounts

Savings accounts offer interest on money that you don’t need for daily or monthly use but want to keep for emergencies or to achieve specific goals. These are available at banks, and you can save money for either short or long periods.

The interest rates on savings accounts vary by bank and the base interest rate set by the Central Bank of Egypt. Some banks offer rates up to 27% or 30%, but they may require a minimum deposit to open an account.

Typically, you can open a savings account with a specific amount and withdraw your funds at any time without restrictions. However, some banks may limit the number of withdrawals per month, and you might incur a penalty for exceeding that limit.

- Certificates of Deposit (CDs)

Certificates of Deposit (CDs) are a type of savings account that offers a fixed interest rate on a specific amount of money for a set period, in exchange for locking in your funds during that time. The interest rates for CDs are generally higher than those for regular savings accounts.

At the end of the CD term (the maturity date), you can withdraw your money and its interest without penalties. However, if you decide to withdraw before the maturity date, you may have to pay a penalty equivalent to a specific number of months' worth of interest. Some banks may waive this penalty under certain conditions.

CDs are an excellent option for long-term saving, but they’re not always the quickest way to grow your money if you're looking for faster returns.

- Emergency Fund

An emergency fund is one of the most important types of savings that everyone should consider, as it serves as a financial safety net that’s easily accessible in case of unexpected circumstances, like job loss, medical expenses, or urgent repairs for your home or car.

To start your emergency fund, set a specific amount that you aim to save, ideally covering 3 to 6 months of your essential expenses. Then, allocate a portion of your income each month to save in a separate savings account or a safe place at home, ensuring easy access when necessary.

The key is to be disciplined about saving and only use this fund in emergencies. This way, you’ll always be prepared for the unexpected without having to borrow or face financial strain.

Differences Between Bank Certificates and Monthly Savings

- Bank Certificates

Bank certificates are fixed amounts of money that you deposit into a bank for a specified period, typically one year or more, with the bank offering a fixed interest rate. The main idea is to lock in your money for a set period, and if you decide to withdraw it before the maturity date, you’ll incur a penalty.

Interest rates on certificates are typically higher than those for savings accounts or monthly savings, but their main advantage is safety and stability, as the interest rate is fixed. This is ideal for those seeking secure, long-term investments and who don’t need immediate access to their funds.

- Monthly Savings

Monthly savings involve setting aside a fixed amount of money each month, either in a savings account or a secure location. The advantage of this method is flexibility, as you can withdraw your money at any time if you need it, unlike certificates that require you to wait until the maturity date. However, the interest rates on monthly savings are usually lower than those for certificates.

This method is ideal for people who want to manage their finances on a regular basis and may have immediate or uncertain financial needs. Monthly savings also help build healthy financial habits, as they encourage consistent saving without a fixed time commitment.

How to Plan a Monthly Savings Budget?

Most of us need a way to track our monthly money flow and understand where it's going. A budget helps you feel in control of your finances and makes the idea of saving toward your goals much easier. The key is to find a method that works for you, so here’s a step-by-step guide to help you build an effective savings budget:

1- Calculate Your Net Income

Creating an effective monthly budget usually starts with assessing your net income, which is the total amount you earn after taxes and job-related benefits, such as insurance.

Be mindful not to focus solely on your gross salary. You may find yourself spending more than you can afford if you think you have more money than is available to you. If you're a freelancer or have an unstable income, ensure you track your monthly earnings to keep your finances in check.

2- Track Your Expenses

Once you know your net income, the next step is to determine where your money is going. Tracking your expenses will help you understand where you’re spending more and identify opportunities to save. The more details you gather, the better. For the first few weeks, track every expense, whether through a mobile app or manually. Bank and credit card statements are a great place to start, as they categorize your expenses.

Next, group your fixed expenses—regular monthly expenses such as rent or credit card bills. Then, create a list of variable expenses, like groceries, fuel, and entertainment. This is where you’ll find opportunities to cut back.

If you want to learn more about how to reduce expenses and save, check out this article.

3- Set Realistic Goals

Before you analyze the information, you’ve gathered, list your short-term and long-term financial goals. Short-term goals may include paying off credit card debt, while long-term goals might include saving for a course or buying a new home.

Be specific with your goals and incorporate them into your budget. It’s also a good idea to allocate a set amount each month to achieve these goals, just as you would for regular expenses. Goals may change over time but setting them will motivate you to stick to your budget.

4- Create Your Budget Plan

Now comes the phase where everything comes together. Start with your net salary, organize your fixed and variable expenses based on the data you've gathered, and then include your savings goals in the budget.

Your budget plan will show you how your income and expenses align. Do you need to find areas to cut costs so you can meet your needs or savings goals? You may need to set realistic spending limits for each category to ensure you stay on track.

5- Regularly Review Your Budget

Once you've set your budget, it's essential to review it regularly alongside your expenses to ensure you're staying on track. Make it a habit to check your budget periodically and follow the steps outlined earlier to stay on the right path toward achieving your financial goals.

Money Fellows: Your Smart Saving Partner

Money Fellows is the perfect solution to support you on your saving journey. The app makes it easy to save your money in a smart and organized way through money circles tailored to your needs. You can choose the money circle that fits your financial situation, whether for the short or long term and receive your payout at the time that aligns with your financial goals.

With Money Fellows, saving is not only secure under the supervision of the Central Bank of Egypt, but it also guarantees flexibility and ease in making payments and receiving your funds.

Saving money is crucial. It provides peace of mind and opens up more options when making decisions that significantly impact your quality of life. Most people who have successfully built substantial and stable wealth achieved it through personal effort and smart decisions regarding saving and investing. You can also be one of those people if you learn how to manage and grow your savings over time.