Save Me, Please!

  
 Today’s blog is all about Savings.

    Why you should have one, how to start one, and different methods you can use to help keep it growing. Since this subject is pretty vast and extremely important I will have many posts dedicated to different aspects of this topic so please keep a lookout. Now, let’s get to it. 

Why should you have a Savings Account?


The answer is pretty simple; life is hella unpredictable. I mean just look at 2020, no one was expecting a global pandemic, quarantine, and sheltering-in-place but here we are. Things happen that we have no control over; cars breakdown, houses require maintenance, jobs can have cutbacks, layoffs, or even shutdowns and let’s not forget the possibility of unforeseen medical issues. We can’t stop these things from happening but we can ease the burden by being better prepared financially; and one way to do this is by having savings in case of emergencies.


 I work for the government and in late 2018/early 2019 the government shutdown due to Congress’ inability to pass a budget. For 35 days, two pay cycles and during the holiday season, I along with 2 million other government employees did not get paid. A study conducted at the time found that approximately 78% of Amercians live paycheck to paycheck (Read More Here). Meaning for these people missing even one paycheck could have a detrimental effect on their lives. Which is why starting/having a savings account is so important.


This time for me was uneasy; not knowing the next time I would get paid and still having to go to work (yes, I was one of the unlucky I mean “essential” ones), was nerve wracking. But knowing I had savings to cover my basic needs i.e. housing, utilities, and food for at least a few months made me feel a little more secure. And having a sense of security especially financially during an emergency or unforeseen event can make a world of difference. 


How to Start a Savings Plan


    There are numerous types of savings plans. You have certificates of deposits (CDs), IRAs, Roth IRAs, and 401(K)s to name a few but these types of accounts are generally for storing money for long periods of time and can have penalties if you withdraw your money before the agreed upon terms. In this post, however, we’re talking about being able to have money readily accessible for emergencies therefore I will be focusing on deposit savings accounts which is just another way to refer to a standard savings account.


Starting a savings account is fairly easy. Below are a few steps to help you through the process.


  1. Determine which bank you want to use. Most people opt to use the same bank that they use for checking but I would advise to do a little research first. Find out the banks requirements; do they charge service fees, are you required to have a certain minimum balance, what's their interest rates?

  2. Make sure you have the necessary documents. Generally you’ll need some form of government issued-ID (driver’s license, state issued ID, passport), your Social Security Number, an address, and phone number.

  3. Nowadays you can usually open an account either online or in-person by filling out an application form.

  4. Depending on the bank you may be required to submit an initial deposit so keep that in mind.


When searching for a bank to open a savings account with, I would suggest looking into a high-interest savings account. These accounts offer higher interest rates or APY (annual percentage rates) then traditional accounts. I mean why not have your money make more money for you, if possible. I use Ally Bank and at its height my savings accounts were earning 2.20% in interest compared to the average 0.06% that most traditional banks offer. But there are lots of different banks that offer high interest savings accounts so please be sure to shop around and find one that fits your needs.When I first joined Ally it had one of the top high-interest savings accounts offering one of the highest APYs. This is no longer the case, but I do like their services so I intend to stay with them at least for now but I say this to point out why it is important to do your research. Here's an article with some of the current best High-Yield Online Savings Accounts.


 (Important Note: Just to make sure you’re not blind-sided just keep in mind that you do have to pay taxes on high-interest savings accounts if your account earns over $10 in interest. But from what I’ve found personally, what you pay in taxes compared to the amount of interest you would have made on a standard savings account you’ll still come out on top.)


Methods to Use to Help Keep Your Savings on Track


There are a few different methods that you can use to help keep your savings on track. 


  1. Pay Yourself First

    1. Every month we sit down to pay our bills, I’m speaking figuratively, but you get the point. We pay our landlords or mortgage companies, the utilities companies, our cell phone and internet providers and then we get whatever’s left over. But why is that? You worked for the money shouldn’t you be the first person to get a piece of it? I read this in an article years ago and it really resonated with me. It made so much sense. Why was Comcast, BGE, Verizon, and my apartment the first to get cuts of what I earned? So from that day on I decided I’d pay myself like I’d pay a bill and I’d pay myself first.


  1. Don’t Overextend  

    1. What I mean by this is to be reasonable. Don’t impose an excessive burden on yourself if you realistically can’t afford it. Don’t commit to saving $200 a month if you can honestly only afford to do without $50.


  1. A Little is Just as Good as A Lot

    1. I know some people have the belief that if they aren’t able to put away large amounts of money then it means that they don’t have any money to save. That’s not true. We all have to start somewhere and when you’re just starting out you may not be able to set aside large amounts of money and guess what that’s okay. I said it once and I’ll say it again, something is always better than nothing. If you’re only able to save $20 a month, well at the end of the year you’d have $240. If instead you told yourself that $20 wasn’t worth saving so you opt to save nothing, well at the end of the year you’d have nothing. And I dunno about you but $240 is a lot better than nothing.


  1. Don’t Treat it as a Second Checking Account

    1. As your savings start to grow it may be tempting to pick a little off here and there, but remember your savings have a purpose and should not be used carelessly. Doing so risks you not having the necessary funds when needed.


  1. Consistency is Key

    1. The best way at keeping your savings on track is to be consistent. Try your best to contribute monthly. If you do happen to miss a month don’t beat yourself up just get back to it the following month. If you don’t trust yourself to remember contributing monthly you can always automate the process if you have it. 


It doesn’t take a huge effort to save. Just a little determination. Having a financial cushion when times get rough can give you a little peace of mind which can make a world of difference.

Comments

  1. I was always interested in the banks or credit cards that rounded up a charge to the next dollar and took the remainder and put it in your savings account. For example, if the store charged $5.25, then the bank would put $.75 from your checking into your savings account or give it as a cash back later. I don’t hear about that service really anymore. Is it still around? Did you ever use something like that?

    ReplyDelete
  2. Thanks for the comment. I personally do not use this service so thanks for bringing it up! And yes these services are still around. Here's an article reviewing the top 5 (https://www.forbes.com/advisor/personal-finance/the-5-best-round-up-apps-for-saving-money/). This is another method that people can use to help maximize or at least keep their savings on track.

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  3. This comment has been removed by the author.

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  4. OMG! This is soo helpful! I have been struggling to save money! Put a little in for a rainy day and then a Tsunami comes -_- but you are correct better to have $240 at the end of the year than 0! Thanks for the information!

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    Replies
    1. Awesome! So glad you found this useful!

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  5. This was very helpful. I have trouble saving myself but I have started paying myself as you sugguested. I know in the past picking off my savings was a bad habit so I am happy I've gotten better at that. I agree with the idea that you don't have to put side a lot. And I didn't know about looking into intrest rating of a saving account so thanks so much for that information.

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    Replies
    1. Great to hear that you were able to incorporate one of the methods to help improve your savings habit. Next week I will be going into ways you can help boost your savings and apps you can use to help you saving effortlessly. So, stay tuned...

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  6. This is a concept my grandfather passed down to my mother and then to me. He owned is own business and was adamant about making sure he set aside for himself first before paying the bills. Currently trying to get this concept to stick in the minds of my children as well. Thanks for the info and the extra validation that paying yourself first is a must!

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    Replies
    1. That's a great lesson to pass down from generation to generation! And I'm sure you'll children will appreciate you teaching this to them now when they're older. Thanks for the comment!

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