Saving is the cornerstone to financial health. It helps you weather emergencies, pay for bigger purchases, and over time can allow you to do achieve your financial dreams. You may want to save for a downpayment on a home, save for a new car, or travel the world. While most of us can’t do all these things at once, saving money can help us get there bit by bit. The key to smart saving is to put your money in a place you can hold onto it and access it easily. That’s why savings accounts are key.
Why High Interest is Key
Typical savings accounts don’t offer much by way of interest, but you can find high interest savings accounts and use them to your advantage. High interest here doesn’t mean 10% or even 5%.
Let’s say a typical account earns you .01% per year. If you have $10,000 in your saving account you’ll earn $1 per year.
A high interest rate savings account with a rate of 1.25% per year would earn you $125 per year.
The difference is huge! For a savings account that you keep long-term, such as an emergency fund, the difference could be thousands of dollars!
Check out Radius Bank’s high-yield savings account for a great high interest rate. Pair it with a high-interest checking account and see your money grow even faster with a rate that’s 20x the national average.
Savings means Stability
One of the main benefits of keeping your funds in a savings account is that they remain stable. There’s no market fluctuation like there is with the stock market and your funds aren’t tied up like they would be in a CD or in a home purchase.
A savings account also means you can access your funds whenever you need to. Whether it’s an emergency home repair, a family emergency, or a health issue being able to access your funds quickly is key. Being able to transfer same day is key.
Saving for Multiple Goals
Saving for multiple goals can seem tricky. You may want to throw all the money you have at one goal, but if you have multiple short and long goals you may be better off spreading the money around. While an emergency fund can be a general ‘catch all’ for your funds I find it’s better to have multiple accounts I save in for various purposes.
An easy way to save for multiple goals is to create multiple savings accounts at one bank. I created 7 accounts that I save in each month. They include:
- Emergency Fund for things such as family emergencies, job loss, or other emergencies
- Pet Fund for vet emergency visits and yearly visits
- Home Fund for home repairs like appliance repair or replacement, minor home repairs, and costlier repairs or remodeling
- Vacation Fund for future vacations or staycations
- Car Fund for repairs beyond regular maintenance and eventual replacement of our current vehicles
- Holiday Fund for holiday gifts
- Escrow Fund for our yearly homeowner’s insurance and property taxes (some people pay this through their monthly mortgage payment, but we save each month to pay these yearly expenses)
While this may seem excessive in number it works well for me because it allows me to have different buckets for savings and helps me feel like I’m making progress towards all our short and long term goals. Additionally, it makes it easy when we have an unexpected expense. Just last month we had to pay for a water pump ($40) and an inexpensive fix for my car ($35). I just transferred those funds out of the savings accounts and directly to my credit card.
What saving strategies do you use to help you save more?