There’s no better feeling than when your direct deposit hits and you can think of all the ways you could spend that cash. And while there’s something to be said for enjoying the fruits of your labor, having a savings plan in place is one of the best moves you can make for your money. Here’s what you need to know about why you need a savings plan.

Why do you need a savings plan?

A savings plan is a method for saving money that ensures you’ll have it when you need it most. Whether it’s for a medical or personal emergency or just to save up for a down payment for a house, having a budget plan that emphasizes savings can help you achieve goals, deal with setbacks and avoid debt.

Benefits of having a savings plan

There are many benefits of having a savings plan. Accumulating wealth and creating a safety net for yourself can help you avoid tricky financial situations and aid in reaching your goals. Consider the following benefits while making decisions about your savings plan.

Financial security

The confidence in knowing that you’ve already got your rent and groceries covered is the most basic feeling of financial security. Once you build up an emergency fund of three to six months, you’ll feel more secure if you were to be injured and out of work or laid off. Additionally, once you start regularly contributing to retirement savings, you’ll feel more secure about the financial stability of your future.

Debt reduction

Having enough cash in the bank to cover the things you need to buy unexpectedly or at a high cost can help you reduce the amount of debt you take on. While it may not be possible to avoid all types of financing, reducing things like credit card debt and personal loan debt should be a key strategy to building up your savings. Making purchases from your savings instead of credit will save you money over the long term as you won’t have to pay interest fees.

Better credit score

While the amount of money in your savings account doesn’t directly impact your credit score, savings helps you avoid debt in emergencies. The less debt you are forced to take on by circumstance, the better your credit score can be.

Financial freedom

A savings plan can help make a plan for your life as well. Financial freedom means having enough money to do things you want to do. When you have the choice to take time off from work, make a career change or even retire early thanks to the savings you have built up, you’re experiencing the benefits of financial freedom.

Consequences of not having a savings plan

Not building up your savings may come with negative consequences. These may be related to unforeseen struggles or simply limitations put in place by a lack of available cash. Consider the following consequences of not saving enough.

Financial instability

Financial instability is a sense of not knowing if you’re going to have enough money when you need it. This is often known as living paycheck to paycheck. Financial instability may be marked by juggling which bills to pay or paying bills late on occasion. Having a savings plan can help prevent this.


When you don’t have enough money to pay for what you need, you are more likely to take on debt. This may include things like credit card debt, which can grow as interest accrues, or car loans, which have a fixed payment but ultimately cost you more than saving up and paying for a car in cash.

Limited financial options

Without enough savings behind you, your financial options can be limited. For example, if you can only make a small down payment on a car, your auto loan rate may be higher. Similarly, if you don’t have enough money saved up for first, last and security payments on a new apartment, you may not be able to rent that living space you really wanted.

Not being ready for retirement

The common saying “Retirement isn’t an age, it’s a financial number” hints to an important consequence of not having a savings plan: if you don’t have enough money to hit that number, you may have to hold off on retirement until you do.

How to build a good savings plan

Here are six steps to building a good savings plan:

1. Assess your financial situation

To build a good savings plan, start by taking an honest look at your financial situation. Identify how much you make and what your expenses are. See if there are costs you can cut. Calculate how much surplus money you have left that could be saved.

2. Set savings goals

Setting a goal for your savings can make your plan more attainable. Consider setting goals like, “I’d like to save $1,000 by my birthday,” or “I’m going to pay cash for this year’s summer vacation.”

Plan S.M.A.R.T

If you’ve had trouble sticking to goals in the past, get S.M.A.R.T. about it by using this goal-setting system for making your goals achievable one step at a time. Consider these examples:

  • Specific: I’d like to save $2,000 for a car.
  • Measurable: I’d need to save $100 from each paycheck to reach my goal.
  • Achievable: I have an excess of at least $100 from each paycheck.
  • Realistic: I can spare $2,000 for a down payment on a car.
  • Time-measured: I want to save this down payment in five months

3. Create a budget

Create a budget that supports your savings plan. A budget is a way to calibrate the money you have coming in with the money you have going out. When you increase the gap between the money you earn and the money you spend, you’ve got more money that is available for saving.

4. Choose the right savings account

Compare a variety of savings accounts to see which is the best to use for your new savings plan. Weigh the benefits of a CD vs a savings account or consider opening a money market account. Remember to compare interest rates, accessibility and costs associated with these potential accounts.

*The information in the table is not specific to M&T products. Accounts and terms discussed may not be available at M&T.

 Type of account   Minimum balance   Withdrawal restrictions   Fees 
Regular Savings Account  May require a minimum balance  Can withdraw as needed as long as you don’t go below stated minimum balance  ATM fees, overdraft fees, maintenance fees
No-fee accounts are available
High-Yield Savings Account May require a minimum balance Can withdraw as needed as long as you don’t go below minimum balance No-fee accounts are available
Money Market Account May require a higher minimum balance than a typical savings account May have limit on how many checks you write each month No-fee accounts are available
Certificate of Deposit May require a higher minimum balance than a typical savings account Early withdrawal penalties No-fee accounts are available

5. Make a savings plan

Once you have reviewed your situation, set S.M.A.R.T. goals, created a budget and chosen a savings account, it’s time to actually make a plan to save. Decide on the steps you will take to save, such as setting up automatic transfers from your paycheck to a savings account.

6. Track your progress

Stay committed to your savings plan by tracking your progress. You can use old-fashioned pen and paper accounting books, or check out the best budget-tracking apps. Your bank may even have integrated savings tracking features in their mobile banking app.

Tips for successful saving

Successful saving may require changing some of your habits around money. Once you adjust the way you have been handling your income, you may start to see the benefits of a successful saving plan.

Automating your savings

Automating your savings means taking advantage of a particular financial tool to make saving money easier. One way to do so is to request that part of your paycheck be directly deposited into a separate savings account. This can help reduce your temptation to spend savings.

The best high-yield savings accounts may also have integrated automated savings functions. These may be similar to cash-based envelope savings systems and allow you to earmark particular amounts for specific savings goals.

Cutting expenses

It’s easier to save money when you’re spending less. Cutting expenses can be a big boost to your savings plan. One of your first steps when creating a budget may be to look for places to reduce spending.

Making saving a habit

Making saving a routine habit helps to increase the amount you save. Financial mindfulness and routine are a great way to up your savings game, so make a practice of immediately moving part of your paycheck into a savings account. By making this manual transfer part of your financial habits, you’ll internalize a savings mindset.

This article was written by Emily Cahill from Money and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to


The opinions expressed within this article is that of Emily Cahill and not that of M&T Bank, nor does M&T Bank endorse the opinions.

This article is not intended to provide tax, legal, accounting, financial, or other professional advice. Always consult a qualified professional about your personal situation.