Nine Cash-Saving Strategies That Pay Big Bucks

The expression "a penny saved is a penny earned" doesn't cut it these days. But saving a few dollars here and there can add up, particularly if you park the money in a high-interest-bearing savings account or, better yet, a tax-favored vehicle such as a 529 plan or an IRA containing a mix of investments that offer higher returns over the long run.

OK, so 10 percent annual returns from the stock market may seem farfetched after the recent market mayhem. But we contend that it's not unreasonable to expect 7 percent annualized returns from a conservative blend of bonds and stocks over a period of 15 years. These are the assumptions we used below to calculate how the few bucks you squirrel away today can turn into big-time savings later.

Form a cooking co-op
Sure, cooking is cheaper than eating out, but a daily home-cooked meal simply isn't an option for many full-time working parents. Ginny Bowie, vice president of a Richmond, Va.-based financial securities firm and mother of three, solved her scheduling and budgeting dilemma in one swoop by forming a cooking co-op.

"Every Tuesday night, I cook dinner for three families besides my own, which is about 18 to 20 people, and deliver it to their door," Bowie says. "Monday, Wednesday and Thursday, the three other families cook for me."

Money in Mattress
Money in Mattress

Bowie's Web site and DVD, "If it's Tuesday ... it's my night 2 cook," contain recipes and tips for starting a co-op. She says cooking in bulk has cut her grocery bill in half and practically eliminated her need for eating out.

What it's worth
The average household spent $6,133 per year on food -- $3,465 on groceries and $2,668 on meals away from the home -- in 2007, the most recent year for which data are available from the U.S. Bureau of Labor Statistics. We suspect food prices soared in 2008, but let's use these numbers anyway. Assuming that a co-op could reduce the grocery bill by half and lower restaurant expenses by, say, 60 percent (factoring in the occasional meal out), families could save $3,333 per year by going co-op.

Here's the payoff for switching meal plans:

• A one-time deposit of $3,333 grows to $9,196 in 15 years.
• Annual deposits of $3,333 add up to $83,755.

Find free entertainment
Between nights out at rock concerts, opera and theater performances, some Americans spend more on entertainment than on groceries and gasoline combined. To cut down entertainment expenses, Jaclyn Young, a Washington, D.C.-based actress, hunts for free events in her area and volunteers as an usher for live theater.

"I see at least two plays every weekend, and since tickets are $18 to $45 apiece, that's a lot of money if I wasn't ushering," Young says. "I volunteer at 15 theaters and save probably $160 a month doing it."

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What it's worth
We don't recommend forgoing all cultural events, but consumers who opt for free or low-cost concerts, lectures, outdoor movies and art shows even one night per weekend can easily reduce their entertainment budget by $50 to $100 per month. For purposes of our calculation, let's split the difference and assume savings of $75 a month or $900 a year for 15 years.

• A one-time deposit of $900 grows to $2,483.
• Annual deposits of $900 add up to $22,616.

Use the public library
Home entertainment costs can be considerable if you add up cable television, satellite radio, video games and movie rentals. Young recommends getting familiar with the public library. In addition to carrying books, magazines, audiobooks, films and CDs, libraries frequently offer free children's events, language programs, financial literacy workshops and performing arts events to cut your budget down further. If the library in your area is scant on resources, check out what's on campus at the nearest college or university.

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