Managing A Savings Account

Managing A Savings Account

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I have previously written about tracking your savings within a budget just as you track your expenses. However, this is assuming that you already have a savings account, savings goal and long-term financial plan in mind. So, this time, let me start from the beginning.

Why Save?

  1. Emergency Fund: This savings is essential for financial stability. Unexpected problems will always come up in life that cost money. Car issues, home problems, medical emergencies, job loss, computer malfunctions and family emergencies are all things we must plan for, even if we hope they never happen. The experts suggest saving 6-8 months living expenses.

    To get started, let’s set a reasonable goal of 3 months. Using your budget, calculate your monthly fixed expenses (only) and multiply by 3. At a minimum, this is how much you need to survive for three months.

  2. Travel Fund: Everyone wants to go on a guilt-free vacation! Start saving early so you have enough “splurge” money to not dread coming home to credit card bills.
  3. Car Fund: If you are thinking about purchasing a car, start putting some money in savings now for it. Set your goal to be the down payment.

How Much To Save?

It is difficult to know if you are putting too much or too little into your savings account. You do not want to spread your money too thin but you also want to make your savings goal in a reasonable amount of time.

My general rule is to use some percentage of your income. Start with 10% of your monthly income then increase to as much as you comfortably can.

Whether you manually transfer this to your savings or have an automatic payment is up to you. Just make sure to think of it as a payment, so you continue to pay yourself every month.

Creating A Savings Goal

There is little point to having a savings plan if you do not have a savings goal. It is best if your first savings goal is reachable within a year. We can use the calculator below provided by forex traders to determine how long it will take us to reach our goal. Also, this tool will help to determine how much to put into your savings monthly.

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Staying On Track

Even if you are making automatic payments to your savings account, it is best to keep an eye on it. I use a savings worksheet included in my budget template. This allows me to see my savings balance, interest accrued and how close I am to reaching my goal! Seeing the percentage saved is a huge motivator! If I am 40% away from reaching my savings goal, I will try my hardest to transfer more money so I can reach my goal sooner than expected. There is a huge feeling of accomplishment once you have completed your first emergency or travel fund.

Where To Save?

There are numerous resources and other personal finance blogs that address this thoroughly, so I will just share my personal experiences. I use ING mainly because I like the lack of access to my savings. I never want to be tempted to use it and with a 3 day wait on transfers, I never am. Another high-interest rate bank is Ally. I have never used them, though some friends do. I suggest doing thorough bank research before choosing a savings account.

When To Save?

Now! Immediately! This month! As soon as possible, open a savings account, set a goal, make your first transfer and start tracking! Set up a payment system that you are comfortable with. Some people make savings transfer every paycheck, some just once a month. It really does not matter at all as long as you do it! You will be well on your way to not only having a solid emergency fund, but also to financial stability.

Readers, at what age did you open your first savings account?

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6 Replies to “Managing A Savings Account”

  1. Great post! It’s always so hard to get started- but easy once you start. I found that it was much easier (for me anyways) to do the savings accounts automatically.

    I added a “pet savings” account for my dog, in case he needs to go to the vet again =)

  2. @youngandthrifty: A “Pet Savings” account is a great idea! Pets are definitely prone to getting into all sorts of trouble and unexpected vet bills can be quite costly. Great planning!

  3. i found the best way to save is to have some more direct deposited directly into your savings. I do that per paycheck right to a ING account.

  4. I opened my first savings account as part of the College Checking Account off through WellsFargo. In order to have the checking account as free, a minium had to be transferred into savings but could be re-transferred over. I didn’t start saving hardcore until this year though. I always wanted to spend it but lately I’ve been all about saving.

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