Saving money is the habit of putting money aside and not spending it. People have various purposes for saving money, such as retirement, kids’ college funds, or in case of an emergency.
But just how do you know where to start? How much money should you save and what are the best savings accounts?
First, you’ll need to determine how much money you should be saving. Determine what your goal is in saving money, then figure out how much you want to save per year. Consider whether you’ll need the money at a certain age, for example, if you are planning to retire at age 65.
Also, figure out what, if any, sacrifices you will need to make in order to save money each month. The amount of money that should be saved is different for everyone, because it depends on personal circumstances.
Look After Yourself Method
One tried-and-true strategy for saving money is to pay yourself first. When you sit down to write checks for your bills each month, write a check to yourself first after deciding on an amount that you are comfortable with. Then, deposit that check in a savings account.
When using the “pay yourself first” money-saving method, you may have to give up a few indulgences such as store-bought cups of coffee or restaurant meals, but it will be worth it in the end when you start to see your savings grow.
You’ll also need to decide on the best savings accounts for holding your money, which will depend on what your needs are. Is your savings account going to be strictly for savings purposes, or is it for a family vacation?
The kind of savings account that you choose will depend on how often you need to access the money and how you can get the best interest rates. An online savings account is one type that typically offers higher interest rates than those available through a brick and mortar bank account.
Popular online banks such as HSBC, Ally and ING Direct may also offer you an incentive to join. If you choose this route, you can link your online savings account to any other bank accounts you have for easy money transfers.
In Case of a Rainy Day
You may also wish to keep some savings in an emergency fund. These funds come in handy for unexpected expenses, such as fixing a car or repairing home damage. If you can’t afford these expenses on the spot, then an emergency fund is right for you.
For most people, a good starting point to save money for an emergency fund is to put $50 a month into the account. A convenient way to do this is to set up a direct deposit with your employer so that the funds are deposited directly into your emergency account.
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