Creating a savings account and successfully managing it is definitely easier said than done. Putting money away can be a great challenge, and then having the discipline to not constantly dip into your savings can be incredibly hard.
However, for anyone that strives for financial stability and that wants a financial safety net, it’s essential to build a solid savings account. If you’re thinking of setting up a savings account or want to maximize the effectiveness of your current one, here are five tips to help you successfully manage your savings:
Secure a Great Interest Rate
If you’ve chosen to put your money into savings rather than invest it, it’s imperative that you choose an account that has a decent interest rate, as this will ensure that you get some return on the money you’ve decided to put into safe keeping. For the very best interest rates, try putting your money into an exclusively online bank, as these online banks usually offer the highest interest rates. Just make sure you choose to put your money into an established online bank that has a good reputation, as there are of course plenty of bank scams on the web.
Put Aside Money Each Month
Putting money sporadically into a savings account will likely leave you with a disorganized and dwindling savings account. Like most things it’s best to set up some kind of routine, and program a set amount of money from your checking account to be put into your savings account each month. This way you’ll know that you’re putting away money each month, and that your savings is gradually building. It’s traditionally advised that you should put at least 10% of your monthly paycheck into savings, but to really see your savings account figures grow, you’ll want to put in considerably more.
Make Creating an Emergency Fund a Priority
You never know when financial disaster may strike, especially in this tough economy, so make every penny you save count by creating an emergency fund before you take out money from your savings account to spend on a vacation or whatever else it is you’re saving towards. Try to save a six month emergency fund, which should cover all of your expenses for that period if you should lose your job or be met with sudden unforeseen expenses. Savings this much up can be grueling, but once you’ve hit target, you can then start saving up for the fun stuff.
Keep Track of Your Monthly Spending
Even if you put away a generous amount of money each month, try to still keep track of what you spend each month. Perhaps there are areas in which you could cut back on or unnecessary expenditures – if there is room for scaling back definitely consider doing so. You can then use this saved money to top up your savings account with, or even increase your monthly transfer amount with. Spending money as soon as you get it can be fun, but it will do little to help you set up a bright financial future, or be able to buy the big stuff like cars or houses, so it’s wise to save as much as you can get away with.
Learn to Differentiate between Wants and Needs
When saving, try to save for what you want and only spend what you need. This way you could potentially save more than you spend each month, allowing your savings to skyrocket in no time. The last thing you want to do is be irresponsible with your money, and find yourself so stuck that you have to get an auto title loan or take out a second mortgage to make ends meet. Only spend what you absolutely have to on a month to month basis. Of course we all need to treat ourselves now and again, but keep in mind that being shrewd with your money can go a very long way.
No matter how large or small your income is, absolutely commit to a savings account which you make monthly additions to. A savings account can help you out when you’re in financial trouble, and the financial cushion it provides can be incredibly reassuring. So what are you waiting for? Commit to a savings account today.