CPAs: Encourage Your Clients to Save

Most people have not saved enough to keep them reasonably comfortable during retirement, let alone saved for emergencies or big purchases. Further, many people take on debt without a plan to pay it off. You, as a CPA, are in a position to help advise your clients, helping them think about what they should be saving for and how. 

Discussing saving with your clients

Build the topic of saving into every meeting. Develop the skill to weave it in effortlessly, and help your clients understand that saving is as much a part of their monthly expenses as food and housing – except when saving, you’re paying yourself. 

Start by asking what percentage of their income is earmarked for savings. Stating it in this matter-of-fact way will help them see savings as a “given.” Then question them about what major purchases they may be hoping for and what timeframe they might have for these expenditures. With this information you can begin to help them prioritize and create a saving plan. 

Saving priorities

You should have a clear sense of your client’s debt level, and paying down debt should be a priority. In most cases, the interest paid on debt is higher than interest that may be gained from relatively conservative investments. So discuss with your client a plan to decrease debt on schedule or even ahead of schedule. 

The next priority is an emergency fund. The rule of thumb is to have six to twelve months of income put away in savings for emergencies. These emergencies might include job loss, major car repair or replacement, medical bills, and unexpected home repairs. Life happens. Help your clients be prepared.

Retirement savings should also be a priority. Discuss with your clients the different ways to save for retirement and go through scenarios to help them see how much they should be saving. Young clients may think retirement is too far away to think about; however, you can show them that, through the wonderful power of compounding, a small, painless amount saved each paycheck now will add up to significant savings later. Young people also need to be concerned about the instability of the social security system and not assume it will provide them with much support when they retire. 

Older clients may be surprised and disappointed at how much they will have to save in order to catch up so they will have a comfortable retirement. But you can help them find ways to save now so they won’t be in need later. 

Ways to make saving easier

Start by asking your clients what pre-tax savings opportunities their employers offer. 401(k), Health Savings Accounts (HSA), and Flexible Spending Accounts (FSA) often include an employer contribution, and the investment will grow tax-free for years. Traditional IRAs and Roth IRAs are popular retirement savings options as well. While each has limitations, such as what the money can be used for, they will help your clients save with little effort on their part and provide tax benefits, either now or in the future. 

There are a variety of other auto-savings methods clients could use, such as setting up directly deposited paychecks to automatically distribute money to savings accounts, as well as apps that monitor your spending habits and automatically save in small increments throughout the month.

There are many creative options for making a little extra cash. Other ideas you could brainstorm with your clients include selling items using an online store or opening an Airbnb. Then there’s the old-fashioned way: spend less. If your client budgets $500 per month for “fun,” suggest making it $400 and putting the $100 towards one of the priorities you and your client have defined together. 

Other goals

Clients may have other savings goals, such as buying a home, paying for their children’s education, or taking a special vacation. Once they have a good plan for paying off debt, creating an emergency fund, and saving for retirement, discuss with them creative ways to save for these other goals. By leveraging your knowledge and your trusted position, you can be a partner in good financial habits and keep your clients for years to come.