That is a good idea to set up an automatic transfer every paycheck to take out 10% for savings before you can get your greedy hands on it I think I’ll start to do that, and once a few more bills get paid off, start looking into better options than the normal savings account (which you’re right, won’t even cover inflation).

I do have various 401K investment options through my job at Purdue University, and they actually contribute a good chunk of change on my behalf. I believe they’re all mutual fund options, and I set the percentages to spread them out between high- and low-risk options, with slightly more emphasis going toward the low-risk (S&P 500, etc.).

I like the idea of thinking of that 10% as just another bill you have to pay each month, but one that takes priority. (Of course, it’s not my idea–I’ve seen it mentioned in a few different places.) And when I pay off my car this fall, I could take the amount I’ve been paying monthly and invest it each month–I wouldn’t feel the difference at all, but it would make a big difference in how much money I have working for me.

If you put in the account $50 a month at an annual percentage yield of 2.80% (Ing Direct) over five years, you’ll come out with a total of $3,223.64.