Interestingly, it’s generally believed that this financial phrase originated from farmers in the 14th century who laid an egg (either fake or real) in a nest to encourage a hen to continue laying new eggs in the same place. This analogy flew from the farm fields to the financial fields, standing the test of time in encouraging people to do the same with their retirement savings account to make it grow with learned repetition.
So, does a nest egg always refer to a retirement savings account? Not necessarily, say some advisors. While generally this is true, building a nest egg can refer to any amount of savings set aside for a specific purpose. What investment planners and advisors do agree on, however, is that a nest egg is always some amount of money set aside for a specific purpose. Whether that’s retirement or a new motorcycle, well, that’s up to you!
Here are some tips to help you grow your nest egg methodically and quickly:
Tip #1: Don’t wait to start.
It may seem like common sense, but you can’t grow anything without starting with a seed. By starting small—just like the farmers in the 14th century did with a single egg—you’ll have a visual reminder that you’ve planted a seed. If you don’t have enough money to put in an investment account of some kind, simply start with a special savings account that you contribute to regularly. Verve even helps you name your smaller nest eggs, offering up to 10 sub-savings accounts for you to save for special purposes. Once you put names on those little nest eggs, it’s a little harder to crack them open for just anything, and gives you a good place to store more dollars as your income grows.
Tip #2: Make room for more by budgeting for more.
Ok, so you’ve got a good start. The nest egg is laid. How can you get the hens to lay more now? Well, it won’t happen the way it did for the farmers, that’s for sure. You have to till the fields of your own budget, finding ways to harvest more from your income on a regular basis. That comes from purposeful planning and execution. Much like a diet, you can’t cheat on a financial plan and expect good results. And just like losing weight is basic math (calories taken in minus calories burned), so is saving money. The only way to set aside more money for savings is to cut your expenses to allow for savings (or to begin working another job or find a new one that pays more). Find the places you can cut fat from your monthly budget and set up automatic transfers with a purposeful amount to that nest egg account right away. If the transfer happens automatically, you’re a little more likely to stick to your monthly budget numbers—and to building that nest egg. Don’t have a formal budget yet? Check out our Budgeting 101 for Beginners tips here.
Tip #3: Plant your nest egg somewhere safe to accelerate growth.
If you’re saving for that motorcycle, leaving it in a Verve savings account and growing with modest interest income over time may be a good approach. But if you’re thinking your nest egg is really a seed for a retirement planning account, when it gets to be large enough (somewhere around $2,000 will allow you to keep $1,000 for an emergency fund and move the other $1,000), move it to a more aggressive investment account that can provide larger returns over time. An investment account divvied up in stocks, bonds and cash can help you grow your nest egg while protecting its core. Not sure where to start with investing? Our Verve Wealth Management department can help you understand the basics and determine the best steps from here to help you grow your nest egg.
Tip #4: Know how big you want your nest egg to be.
Since you started saving right away, you may not have had time yet to do any retirement planning calculations. That’s ok. There’s time to do that now using this handy retirement calculator. You may find out that you need to be lining your nest with a few more Benjamins to get to where you want to be, but at least you’ve covered both ends of getting a nest: starting one and finding out how much you should be setting aside. All you need now is a plan to close the gap.
Tip #5: Start to close the gap on what you have and what you need.
If your savings number today won’t get you to what it needs to be when you retire, there’s still time to make adjustments to close the gap. Time is generally on your side, especially if you’re young. You have a lifetime of raises and job changes and smart spending decisions to make ahead of you—all of which can influence the outcome of how big your nest egg ultimately will be when you retire. But like anything that needs nurturing, a nest egg can only grow if you give it the attention it needs and check on it regularly. After all, you don’t just think those farmers put the fake eggs in the nest and left them alone, do you? Certainly they checked back in on them to ensure their plan was working, and you’ll need to do the same. Check, adjust and then check and adjust again and again until you get the nest egg and close the gap on what you have and what you need.