Each of us could quickly think of several reasons why we don't save more money. Excuses range from the routine (there's nothing left at the end of the month?any extra money goes to pay off debt) to the philosophical (who knows what the future might bring?I can't live my life worrying about finances).

These excuses ignore two simple facts: personal savings are important and saving money is doable! Even the most modest savings account comes in handy for unexpected expenses, like car repairs or medical emergencies. Long-term, savings and investments can help us with major expenses, like buying a new house; pay for our children's education; cover living expenses if we lose our jobs; and, provide financial security when we retire.

It's scary to think that most of us have only enough in personal savings to cover one or two lost paychecks. We all need to save money to boost our financial security and contribute to our financial independence. And, by taking small steps, anyone can build their savings.

WHO Needs to Save?

Everyone does! If you're a child or teen, establishing a savings account teaches you that money can grow if carefully managed and invested. If you're an adult, building savings is both a practical necessity (to cover emergency expenses) and a necessary practice (to meet long-term financial goals). Even if you are in your senior years, the savings habit should continue. Inflation doesn't stop because you are getting older, and the cost of food, prescription drugs and other necessities keeps rising.

WHEN Should I Begin Saving?

It's never too early to begin to save and it's never too late. That means today is the perfect time to start!

HOW Do I Begin?

The best way to start saving is to play detective. Act like you're trying to solve the mystery of "missed savings opportunities." Gather the facts, look for clues, talk to eye witnesses, determine motives, outline potential solutions and forge a plan to carefully track your new savings goals.

Gather the facts: Where are you going to get the money to put aside to save? You'll have to gather information on how you currently spend the money that you bring in. Track your daily expenses for a week and then look at your once-a-month big expenses (rent or mortgage, car loan, credit card bills). Now mark each item with either an N for items that you Need or Necessities (rent, grocery bills, medicine, health insurance, gas) or a W for Want, those items that are luxuries or things that you want, not need (eating out, daily designer java, latest toys or technology gizmos).

Talk to eye witnesses: If you're single, you can skip this step. If you have a family, they are "eye witnesses" to overall spending habits. Your spouse or partner can help identify suspect spending habits and set saving goals. Remember, those who contribute ideas are more likely to be supportive, so be sure to work together to devise a spending plan you both can agree to.

With kids, you can make it into a game. Suggest that if they are willing to make a sacrifice or two (give up a fast food meal for a home-cooked one), you'll put some of the money saved into their own savings account. If they're teenagers, ask for their suggestions for ways to cut expenses. Or perhaps they would be willing to take on babysitting, pet-sitting or other work part-time to help with clothing or activities expenses. This will enable you to save the money that you otherwise would have spent for those items.

Look for clues: Look for clues that identify "suspect" spending habits. First, review your list of Wants. Decide which two or three luxuries you can live without for a month. You might want to try making your own coffee each morning or bringing a bag lunch to work. How about reading the news online or checking books out of the library, instead of paying for subscriptions or new reading materials? Maybe you can forego one dinner out each week. Make choices you and your family can live with.

Now, review your Needs list. Believe it or not, there are savings that can be gained from these items. Perhaps there is a less expensive grocery store in your community or you can save on food expenses by buying in bulk or using coupons. If you drive to work, calculate the cost of gas, car maintenance and insurance and parking fees. Would it be less expensive to take public transportation or join a carpool? If credit card debt is a big expense, look into lower rate credit cards or transferring your balances to a home equity loan. When was the last time you looked at refinancing your mortgage? With interest rates low, it might make sense to refinance and bank the extra monthly savings.

Determine motives: Identifying your motive(s) for saving will help strengthen your commitment to put aside a set amount each week or each month. What is important to you? What keeps you awake at night? Do you worry about your car that's on its last legs? Does credit card debt eat away at you? Do you have two children nearing college age? Are you wondering if you'll have enough money to retire in time to enjoy life?

Now, consider your dreams. Do you yearn for a bigger house or moving to a safer neighborhood? Do you envision being able to provide your children a better education that you received?

Put together a list of financial goals that will assist in eliminating some worries and achieving your dreams. These goals will serve as your motivations for saving more money. List the most important goals first and estimate the cost of reaching those goals. Now indicate whether the goal is short-term or long-term. Short-term goals are those you'd like to achieve in one or two years, like buying a new appliance. Long-term goals, like saving to for a new house or your children's college education, will most likely take five years or more to achieve

Outline potential solutions: You can start small and build from there. Small changes in spending habits can yield big savings down the line.

Pull out your Needs and Luxury lists to figure out where you can cut expenses. Put together a list of cost-saving steps, indicating the amount you expect to save weekly by forgoing that expense. Your plan might look like this:

• Forgo daily designer java (weekly savings of $6.50)
• Stop buying lottery tickets each week ($3.00)
• Switch long-distance phone service ($5.00)
• Refinance mortgage ($30)
• Carpool to work ($25)
• Cut back on restaurant meals ($25)

Forge a plan to track your savings goals: This means formalizing a budget. A budget is simply a spending plan that helps you to forecast and control your expenses. Write down your take home pay and then put together a list of your monthly expenses. Take into account the cost-saving actions that you have identified from your Needs and Wants lists. You should have a sum of money now that's been freed up for saving. If not, go back and review your expenses again and decide what can be eliminated, curbed or refinanced.

Don't finalize your budget plan until you've tested it for a few weeks. Is it working? Are there revisions you need to make? Maybe you've become energized enough to make even more cutbacks! Remember, the goal is to spend less than you earn. That gives you money to put into personal savings.

WHAT Do I Do Next?

Savings means putting some of your money away for emergencies or a short-term goal. To do so, you'll need to gather some basic information, select a financial institution and establish an emergency fund.

Gather basic information

What is the interest rate? Savings accounts are designed to keep your money safe and help it grow. Your bank or credit union pays you a fee, called interest, when you leave your money on deposit. APY (annual percentage yield) after an interest rate indicates the amount your money would earn if left on deposit for one year.

Look for savings products that pay compound interest. Compound interest allows you to earn interest on both your deposit and the interest that it earns as time goes on. Simple interest pays interest only on your deposits.

What do I need to open a savings account? To open a savings account, you will most likely need two forms of identification, one with a picture on it, and be asked to provide your Social Security number.

Ask about fees and withdrawal penalties: Ask the financial institution what amount is required for an initial deposit. Amounts will vary from only $1 to several hundred dollars. Find out if you need to keep a minimum amount on deposit for the account to remain open. Check to make sure that the savings plan you choose does not charge for withdrawing money.

Select a Savings Institution

Before opening a savings account with a bank or other financial institution, find out whether the account is insured by the federal government. Savings accounts at banks are insured by the federal government (FDIC) for up to $100,000.

Credit unions are nonprofit savings and lending organizations that provide services to members who have a common bond, such as working for the same company or belonging to the same church. Credit unions offer savings accounts (called share accounts) and other financial services. Deposits in federal and state chartered credit unions are insured for up to $100,000 through the National Credit Union Administration.

To get the best interest rate, services and convenient locations, you'll want to compare several financial institutions.

Establish an Emergency Fund

Consider your short-term savings needs first. If you haven't done so already, you'll need to put money aside into an "emergency fund," which can help cover expenses in case you lose your job, suffer an injury or are hit with another type of unexpected financial demand. This money should equal at least three months of take home pay for the family's primary breadwinner.

You'll want to be able to withdraw money from your emergency fund quickly and easily, without financial penalty. Accounts that can be accessed on short notice include a savings account, credit union share account, a money market deposit account or a short-term certificate of deposit (CD). While government-insured savings accounts do not earn much interest, the money remains safe and easy to access. Short-term certificates of deposit might pay a little more than a savings account, and can be purchased for terms as short as one month. Compare interest rates at different institutions before making your selection.

One easy way to build your savings account is to arrange to have money automatically transferred from your checking account to your savings account each payday. Ask your bank if they offer such a service. If your employer offers automatic payroll deposit, you might be able to designate a portion of your paycheck to be deposited into your checking account and another portion put into your savings account. That way, you needn't worry about finding money left over to add to your savings at the end of the month.

HOW Do I Meet Long-term Financial Goals?

To meet long-term goals, you will want to consider buying investment products that increase in value and earn much more money than no-risk savings accounts. Investment assets include retirement plans, stocks and bonds, mutual funds and your home or other real estate. In the U.S., the greatest source of wealth for most households is the value of their homes.

To meet long-term goals, most experts advise that you will need to save at least 5 percent of your after-tax earnings each year. If this is hard to do, start with a smaller percentage.

When selecting an investment product, you'll want to consider risks and rewards. Everyone would like to earn the highest possible return on their money. But as the return goes higher, so does the risk that you might lose your money. Savings accounts and bank CDs that are insured by the FDIC offer a smaller return than other types of investments because they are safer. In contrast, stocks, bonds and mutual funds are not insured by the federal government and historically have earned more in the long run.

Certificate of deposits (CDs) are a safe way to make your money grow. They provide a higher return than savings accounts, with little or no risk. CDs sold by banks and some brokerage companies are insured by the FDIC up to $100,000 per depositor.

CD interest rates vary widely, as do the terms of maturity (anywhere from one month to several years). In general, the longer you leave your money on deposit, the higher the interest rate you'll earn. If you cash out a CD before the maturity period ends, you'll most likely pay a penalty.

Money Market Deposit Accounts usually earn slightly higher interest than a savings account, permit easy access to your money and offer the security of FDIC insurance. However, there are typically initial deposit requirements of $1,000 or more and you may be limited in the number of withdrawals or transfers you can make within a given period of time.

Treasury securities are considered safe and secure investments because they are guaranteed by the U.S. government. These products include savings bonds and Treasury bills. Savings bonds can be purchased in denominations ranging from $50 to $10,000. You buy the bonds at a discount from their value at maturity. While interest rates vary, you will always get a minimum return. Savings bonds offer you ready access to your funds and are not subject to federal or state income tax. Information on the types of savings bonds that are available and details on Treasury bills can be found at the Savings Bonds web site (www.savingsbonds.gov).

Individual retirement accounts (IRAs) are savings accounts designed to help people put away up to $3,000 per year for their retirement. (People over 50 can deposit $3,500 per year.) Federal regulations require that IRAs be managed by a custodian, such as a bank, credit union, insurance company, mutual fund or brokerage firm.

There are two kinds of IRAs, traditional and Roth IRAs. Traditional IRAs give account holders a break on income taxes because you can fund the account with pre-tax income and deduct contributions in the current tax year. You don't owe income taxes on your contributions or investment earnings until withdrawal, usually after you are 59 and a half. If you withdraw money from your IRA before that time, you are generally subject to a 10% penalty in addition to the income tax you will owe.

Roth IRAs are not tax-deferred (you invest after-tax income), but earnings are tax-free. If you are over age 59 and a half, or disabled, Roth IRA withdrawals are not subject to federal income tax as long as the account is at least five years old. You may make withdrawals at a younger age if you are using the money for qualified first-time homebuyer expenses of up to $10,000. For more information on IRAs, visit the Internal Revenue Service web site at www.irs.gov.

If you contribute to a traditional IRA and a Roth, your combined contributions in 2004 can't exceed $3,000. (The combined limit for people over 50 is $3,500 per year.)

Employer Savings Plans may be one of the best retirement vehicles available to you. Nearly half of all employers offer some type of contribution to their employees' retirement savings. While contributing to a 401(k) plan will probably reduce your take-home pay, consider the advantages. If your employer offers matching funds, that will help you to maximize your retirement savings. And, at tax time, you will owe less money because the portion of your salary that you contributed to your employer's retirement plan is not taxable.

Stocks permit investors to acquire shares of a company's assets. When you buy stock, you become an "owner" of the company, which can be a risky venture! Remember, unlike FDIC-insurance deposits, the money you invest in securities, mutual funds, and other similar investments, is not federally insured. If you buy stock, you may lose a portion or all of your initial investment if the company does poorly. Conversely, you may see the stock increase in value beyond what you would have earned with a less risky investment product. Do not blindly follow anyone's advice about stocks without checking out the information for yourself.

Mutual funds provide individuals with a means to "diversify" or spread out the risk of investing over a large number of companies. Mutual funds are portfolios of stocks, bonds and other securities managed by professionals in which the public can buy shares. You can often invest with a small amount of money and once invested, you share in the fund's gains, losses and expenses. Before selecting a mutual fund, look carefully at how much the fund will cost you over the amount of time you plan to own its shares.

ONE more thing?

People who are new to the investment world, or who are seeking quick, unrealistic returns on their investments, can fall victim to scam artists. Don't let greed or hasty decisions over-rule common sense. To avoid being scammed by fraudulent investment offers, the Better Business Bureau suggests that you:

• Never divulge your personal information or account numbers in response to phone calls or letters from unknown companies or individuals. Be especially skeptical if the sales pitch includes promises of guaranteed profits or yields that far exceed traditional investments.

• Deal with legitimate, reputable financial institutions. Contact the Better Business Bureau (www.bbb.org) for a reliability report on the company.

• Always check to see if the investment seller is licensed and registered in your state. If they are not, they may be operating illegally. Call you state securities regulator to find out (for contact information, visit www.nasaa.org or look in the white pages of your telephone directory under "government.")

• Get key details in writing and independently research the investment. Reputable companies will be happy to answer questions or provide written documentation. The documentation should contain enough clear and accurate information to allow you or your financial adviser to evaluate and verify the particulars of the investment. If a company will not disclose information in writing, do not invest.

• Never respond to heavy sales pressures, and do not invest in anything you don't fully understand. Consult a financial planner or other professional if you have any doubts.

• If it sounds "too good to be true," it usually is! Claims that promise high returns along with "little or no" risks should be thoroughly investigated. Get a professional opinion when presented with investment opportunities that offer unusually high returns in comparison to other investment options.

For More Information

American Savings Education Council (www.asec.org) offers advice on saving for college, home purchases and retirement.

Bankrate (www.bankrate.com) provides current rates for CDs and money market accounts at various financial institutions.

Consumer @ction (www.consumer-action.org) offers publications on making your money work for you.

The Credit Union National Association (www.creditunion.coop) can help you locate a credit union to join.

The Federal Citizen Information Center (www.pueblo.gsa.gov) has publications to help you manage your money and finances (including "About?Building Financial Freedom").

The Federal Deposit Insurance Corporation (www.fdic.gov) offers facts about bank savings products and investments.

The National Association of Personal Financial Advisors (www.napfa.org) offers tips on planning for your future and locating a qualified financial planner.

The U.S. Securities and Exchange Commission Web site (www.sec.gov) has information on saving and investing.

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