3 steps for saving in the gig economy
You drop off a businesswoman at work with Uber. You give a young couple visiting New York City for the first time the perfect place to stay with Airbnb. You help an elderly neighbor install a new ceiling fan with Task Rabbit. And you deliver groceries to a couple with a new baby with Instacart. Or perhaps you works 10 to 20 hours a week for a start-up or other business.
You’re one of the growing share of Americans earning a living in the gig economy. The humans that power these services rose to 16% in 2015 from 10 percent a decade earlier.
The gig economy offers workers flexibility and access to many employment opportunities. But without a predictable paycheck or employer-sponsored savings or health coverage, self-employed workers are less likely to save. In fact, a survey found that a majority of self-employed workers say they are behind in retirement savings, and that most do not have a specific savings goal.
Preparing for your future, an emergency, or a goal such as purchasing a new home doesn’t need to be difficult, but you do need to make it a priority.
Those with a savings plan are twice as likely to save successfully. So take the pledge to start saving, and use these tips to get started.
Step 1: Save automatically
The easiest and most effective way to save is automatically. An advantage to the high-tech gig economy is that as a rule, most paychecks are directly deposited into the workers’ bank accounts. Ask the company you work with if you can split your paychecks into two different accounts – checking and savings. Or have your bank or credit union automatically transfer money into your savings each month. Not only are you more likely to put money in savings this way, you’re also less likely to spend it.
Step 2: Build an emergency fund
An emergency savings fund consists of a small amount of money, usually in a savings account, that you do not have easy access to. An emergency fund is especially important for workers without a steady paycheck, because it will cover unexpected and unavoidable expenses like a period of unemployment or a repair to a car that’s needed to get to work. By having an emergency fund, you’ll be able to pay these types of expenses without getting into (more) debt.
Step 3: Open a retirement account
You do not need an employer-sponsored account to save for retirement and receive tax benefits. Your can open an Individual Retirement Account (or IRAs).
If you are age 49 or younger, you can contribute $5,500 each year to an IRA. The limit increases to $6,500 if you are age 50 or older. There are two main types of IRA – traditional IRAs and Roth IRAs. In addition, those who are self-employed can put money in a SEP-IRA. Each has its own set of rules and offers different tax benefits. This article breaks down the difference and can help you figure out which is best for you.
3 steps for saving in the #gigeconomy: http://bit.ly/25lZ5y7 v/ @AmericaSaves #savings
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Need motivation to save? Let America Saves help you reach your savings and debt reduction goals. It all starts when you make a commitment to yourself to save. Take the first step today and take the America Saves pledge to save money, reduce debt, and build wealth over time. And it doesn’t stop there. America Saves will keep you motivated with information, advice, tips, and reminders to help you reach your savings goal. Think of us as your own personal support system.
- Written by Madeline Daniels
- Category: Blog
- Published: 25 May 2016