How To Create A Savings Account The Right Way
Getting Started with Savings
Creating a savings goal can be an exciting process. You might have the goal to set a bit of money aside for emergencies, so you can stop living paycheck to paycheck, or you may want to save up for a down payment on a house, a car, a vacation, or getting married.
No matter the goal itself, after you've started saving regularly you may be surprised with how much money you're able to set aside.
- Achieving Your Financial Goals
- Cut Back on Optional Expenses
- Saving Money For Your Financial Goals
- Saving for Emergencies
Achieving Your Financial Goals
Once you've decided on a savings goal, it's crucial to take the time to set up a firm plan to put it into action. Without a plan, your goal will never be achieved.
Smart Tip: If you have any money that you've borrowed at a high rate of interest, you should take the time to pay it off first, before you put too much money into savings. Otherwise, you'll be losing money on the entire process.
Use these tips to make savings work for you:
- Choose a precise amount as a goal.
- Design a clear plan for savings.
- Take time to go over your progress regularly.
- Add a time frame to your goals.
- Tell your loved ones about your savings plan.
You're far more likely to achieve your goals if you remind yourself about them, review them regularly, and commit to them publicly.
There are a few vital parts to saving successfully. One is knowing how much money you'll need to save. The first step to meeting your goal for saving money is to determine how much money you'll need to set aside and how long you estimate it will take you to save that much.
Cut Back on Optional Expenses
In order to meet your goals, it may be necessary to limit discretionary spending on things like shopping, dining out, or entertainment.
List out your daily and weekly expenses in these categories, so that you have a clear idea of where your money is going and where you may be able to cut back.
Saving Money for Your Financial Goals
Short term financial goals are for things you'd like to achieve within a year or two. They could be to pay off a small amount of debt, make a new electronics purchase, take a vacation, or purchase a vehicle. It's important to have a realistic goal and time set aside for this type of savings, as well.
Limit Your Expenses
One of the best methods for saving money for this type of goal is to dramatically reduce your discretionary spending temporarily. It's often easiest to do this if you use cash or your debit card as you make purchases, instead of relying on credit.
Watch for Leaks in Your Spending
Spending leaks are small purchases that you make on a regular basis that can add up to large amounts over the course of a year. If you're working to save money for a specific purchase, it's important to keep an eye on these leaks. One small purchase of $3.50 a day can cost you as much as $840 in a year.
That's enough to make a major purchase for your home, take a trip, or put a dent in your debt. Instead, cut down on these leaks dramatically and use that money for beneficial savings.
Turn in Your Spare Change
Instead of using change for purchases, collect it in a bank or container throughout the week. Once that is full, take it to the bank or a change counting machine, cash it in, and then put that money into savings. This is a fast, easy way to get started with a savings account and see a large amount add up quickly.
Savings Tips - Automation Is Key
Consider opening a savings account online for money towards your goals. These accounts typically offer a higher interest rate. This lets you earn a better interest rate on your savings, set them aside from the rest of your money, and watch your savings grow.
Some banks even offer an option to round up any purchases that you make using your debit card and then transfer this amount to your savings account. You can set the amount to round up, then put the extra into your savings account. This means that if you make a purchase for $12.30, the extra $0.70 will be debited from your bank account and put into your savings account. This is a fast, easy way to add money to savings - set and forget!
If you receive a paycheck, think about transferring part of your pay straight into your savings account. You may want to have your employer do this by direct deposit, or you can set up a transfer from one bank account to another. This allows you to grow your savings account automatically, without needing to remember to make the transfers.
Longer term savings are for things that you'd like to achieve five years or more in the future. These goals could be things like buying a home or paying for college.
Consider investing some money for these types of goals, or speak to a financial planner to learn about investments that work well for what you have in mind.
Savings for Emergencies
No matter what goals you have, it's wise to set some money aside for emergencies. This emergency fund should be in a different account from your daily money and your savings accounts. You should be trying to save up enough money in this account to cover your family's expenses for up to three months in the event of an emergency. It's important to only use the money you set aside in this account for real emergencies and to add the money back as soon as you're able to after you use it. Learn more about emergency accounts here.
Saving money can be easier than you'd think at first. It's important to get started, even if you can only save small amounts at first. Create a savings plan, design some goals, and start setting aside money for your dreams today.