Just like a checking account, a savings account is one of the first and simplest tools of personal finance. It often goes hand-in-hand with a checking account, and marks the beginning of a relationship with your bank. But with the many financial and savings options out there, it can be easy to overlook this resource and not maximize it as much as possible. Here are six strategies to get your savings account to do more.
- Do your research
There are many savings account products out there, and they vary based on their key perks, minimum opening deposit, and minimum balance and pricing options. They also vary in their interest rates, meaning the amount of interest you’ll earn for every dollar you keep in savings. Unlike with loans, with savings accounts the higher the rate the better. Shop around and choose a competitive option.
- Be realistic
As you look at the different savings accounts, the ones with the more competitive interest rates and monthly compounded interest deposits are definitely appealing. But it’s important to be realistic about how many withdrawals you might make, and how much of a minimum balance you can maintain. Not meeting the account requirements can prevent you from being eligible for the savings account, or could result in monthly service charges. You want to ensure your account is a good match for your income, lifestyle, and goals.
- Start as soon as possible
Once you know which savings account is best for you, open it as soon as possible! Benefits of saving start immediately. You can set up an account for a young child and use it as a tool to teach money management and savings. Teens can have accounts to save for first cars or college. Newlyweds can open one to save for a down-payment on a home or prepare for rainy days. Bottom line: It’s a good financial habit, and the earlier you start, the more you can save. It’s never too soon!
- Save automatically
Another way to get the most out of your savings account is to make regular deposits. This can be challenging unless saving money is a natural part of your lifestyle. One helpful took is to automatically transfer your money to your savings account from your checking account, or having a certain amount allocated immediately to savings after your paycheck is directly deposited. This forces you to only operate out of your checking account funds while the savings automatically happens without you even realizing it. You won’t spend what you don’t know you have!
- Set goals
Just like with most things in life, setting a goal for your savings can help you achieve it. A goal provides additional motivation and accountability. Set an exact dollar amount and a timeline for reaching it. The goal can be anything: A down-payment for a house, a car, or a retirement account. Set both monthly and short-term goals to stay on track. If you have a savings account for emergency funds, you may want to open another one for your long-term dreams. Your bank can help you determine options and strategies.
- Explore other savings options
These conversations with your bank may lead to an interest in other savings vehicles beyond traditional savings accounts. Such as:
- Certificates of Deposits (CDs) feature more competitive rates until maturity. You can purchase a CD with terms to not withdraw the money for 6 months to 5 years. If you don’t need immediate access to funds, CDs can be a great investment.
- Individual Retirement Accounts or IRAs. These accounts help you save for retirement by providing specific tax benefits based on whether they are Traditional IRAs or Roth IRAs.
If you’re looking for savings options with greater returns, CDs or IRAs are a more aggressive option and may be worth looking into. Savings accounts are a basic tool, in your arsenal of financial management. They are an effective means of saving money for things you want – or need – down the road. Contact us for more information on selecting the savings account that fits your financial needs.