Tips to Opening a Savings Account

(By Guest Author, Lana Stevens)

Saving money is a very important part of life. Times may be hard, but it is more important to save money now than ever before. Despite excessive qualitative easing put forth by the Federal Reserve, and an inflationary United States’ government monetary policy that encourages consumers to spend and not save, saving money and lowering overall debt is essential to a person’s financial future and overall well-being.

Here are just a few reasons why you need to save your money:

  • Financial Emergencies
  • Vacation
  • House/Car down payment
  • Education
  • Retirement

Some of these things may seem a long way away, but you can never start to save too soon. Building a strong savings account is essential to your financial future.

Don’t Bust Open You Piggy Bank Just Yet

Savings have appeared to have faded to the histories. The average American family has less than $5,000 dollars in savings, and statistics from the National Institute on Retirement Security show that things are not getting much better. Many people do not have nearly enough money to retire once they hit the retirement age.

Only 42 percent of private sector workers between the ages 25 and 64 have any retirement coverage in their current job. That means roughly 38 million workers in the U.S. do not have any retirement account savings at all.

This is all in the face of increased efforts of financial companies to get clients to invest into their 401(k) which is a tax-safe retirement fund. This has led many people to believe that the only option left is mandatory savings, in other words, forcing people to contribute to their retirement funds.

Countries like Australia, Israel and the U.K. have already implemented mandatory savings plans for working class citizens. In Australia, for instance, an employer has to put aside 9 percent of employees’ earnings, much of which will go toward a mandatory retirement fund.

5 Tips to Opening a Savings Account

1. Shop Around – Don’t fall hook, line, and sinker for the first bank that offers you free cookies and coffee. Shop around and find a bank that has a strong reputation of customer satisfaction. Some people like the added convenience of opening a savings account with the bank they already have accounts with, but there’s a lot more to consider. For instance, some banks have restrictions and penalties if you don’t maintain a minimum amount in the account, or they have specific restrictions what happens when you take money out.

2. Deposit Your Money, Don’t Withdraw it! – This is a savings account, not a checking account. Many banks even slap on fees if you withdraw money more than four times during a month. Also, if your account does not have any activity on it after a certain period of time, it could go dormant. A good rule of thumb is to put 10% of your paycheck into your savings account, but that is just the minimum. Feel free to put more toward your savings if you can afford to do so.

It is very important that you do not withdraw too much money, either. Savings is exactly that. Put yourself on a realistic budget, and try your best to abide by it. It may take a little discipline, but as you see your account grow you will be more and more satisfied from the fruits of your labor.

3. Interest Rates – It may sound a little confusing at first, but it is actually quite simple. When it comes to a savings account, the higher the interest rate, the more money you will earn. It is the opposite of having a high interest loan. For instance, if you have 100 dollars in the bank and an interest rate of 1%, then you will have accumulated 1 dollar in interest by the end of the year. Often times, online banks offer higher interest rates than traditional banks, this is great for savers. This is one of the reasons why so many people are switching their accounts online. The more money you put into a bank the more money you will earn.

4. Set Short-Term and Long-Term Goals – Saving money is very difficult to do without a goal insight. It is difficult for humans to set permanent long-term goals. Setting short-term, intermediate, and long-term goals can help mitigate this affect by giving you stepping stones. Every journey begins with a single step.

One way to really help you to save your money up is to have short-term goals that lead up to a long-term goal. If you are saving for a specific goal, like a car or a house, then you will muster much more motivation to save your money! Choose something that you really need, and the sense of accomplish you feel when you reach your goal will be astounding.

5. Get an account ASAP, and start building good habits today – Saving is a habit, and so is spending. Build good savings habits and you will meet your goal sooner than you think. Most importantly, don’t pull back on the saving contributions once you reach your goal! Don’t allow yourself to fall into a habit of spending, instead, continue the good work. You never know when you might need another large sum of money, and who knows, maybe you could pursue a dream that you once that was unreachable. Going back to school, starting your own business, or early retirement is never that far away when you have health savings habits.

Spread the Wealth (of Knowledge)

Good financial habits, such as budgeting and saving, is essential to a successful and happy life. If you have children, open up a savings account and start teaching them the skills they need to succeed. One thing someone can never lose is knowledge, and building a strong core of personal financial skills will pay dividends for decades to come.

Leave a Comment...

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.