By Laura Roler, Military Saves Associate, AFC® Candidate, FINRA Military Spouse Fellow
Deployment – before, during, and after – can be a stressful time to say the least! Thankfully, there are some benefits offered during deployments that can help offset the inconvenience, help you get ahead, and improve your financial readiness. Take a look at the following savings options, and plan to take advantage of them for your next deployment.
Hostile Fire Pay, Family Separation Allowance, Hardship Duty Pay. These are among the special pay and entitlements that may be available to you during your deployment. Make the most of this extra money while you receive it! Instead of spending more because you’re making more, stick to your normal, pre-deployment budget as much as possible, and save the rest for future use – you won’t be sorry that you saved when you retire, buy a car, plan a family vacation. Prior to deployment, set up an automatic allotment in myPay to make deposits to your TSP or savings account. Speaking of savings accounts…
Savings Deposit Program
These days it’s tough to find an interest rate above 1% for a savings account; the average rate is below 1%, which is less than inflation. The Savings Deposit Program (SDP) allows you to deposit up to $10,000 and earn a guaranteed 10% interest during an eligible deployment, beating most savings opportunities out there. By taking full advantage of this, you could earn an extra $1000 over the course of a 12 month deployment. Learn more about the SDP here.
Thrift Savings Plan
Make the most of your tax-exempt pay status while deployed to a combat zone. By maxing out your Roth TSP contribution ($18,000 in 2015), you can ensure that from deposit to withdrawal, that income is ineligible to be taxed, leaving it all for your retirement needs. For more information visit tsp.gov; to start a TSP account visit myPay.
Servicemembers’ Civil Relief Act
Among its many servicemember protections, the SCRA requires lenders to reduce interest rates to 6% on debts incurred prior to entering active duty. That can be very beneficial to National Guard and Reserve members, or to active duty servicemembers with debts established prior to entering active service. But some lenders will also honor the interest rate reduction for active duty members about to deploy. It doesn’t hurt to ask, and it could go a long way in maximizing your savings during deployment. To invoke protections under the SCRA, you will typically need to submit a written request and a copy of your military orders to your lender.
Savings you can – and should – do yourself
An emergency fund of three month’s pay is the rule of thumb, though some financial experts are now recommending six and even nine month’s worth of monthly expenses or income be saved in an emergency fund. While it is unlikely that you will experience a loss of military income while deployed, ask any military spouse – Murphy’s Law tends to reign during deployment! Car trouble, appliance breakdowns, emergency room trips, natural disasters can happen anytime. Prepare and save so that your family can get through these events smoothly and quickly while you are deployed! If you weren’t able to save enough – or any – for emergencies prior to deployment, take advantage of the savings tips above to start or grow your emergency fund.
When you return from deployment, it’s common to want some extra rest, relaxation, fun, and family time. However, the post-deployment period is NOT the time to blow your budget and incur unplanned debt and financial stress. By planning and saving for what is important to you, you may be able to afford that family vacation, motorcycle or boat, new house, or whatever is on your homecoming wish list.
We’ve provided you with some great avenues for saving that are available while you’re deployed. Whatever you’re saving for, make it a priority: Set a Goal. Make a Plan. Save Automatically.
Military Saves, managed by the nonprofit Consumer Federation of America (CFA), seeks to motivate, encourage, and support servicemembers and military families to save money, reduce debt, and build wealth. Learn more at militarysaves.org.