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February 26th, 2013 |
Become Smarter About Saving:
How to Develop a Savings Plan and Grow Your Wealth
Learning how to save money is key to financial security, reaching important financial goals, and enjoying your retirement. Unfortunately, many Americans do not save enough and are unprepared for life’s unexpected circumstances. According to a recent report by the Corporation for Enterprise Development, approximately 44% of Americans could not last for more than three months without income in the event of a job loss or other crisis. Secure yourself, your family and your future by following this guide on how to become smarter about saving.
#1. Develop Your Savings Strategy
Most people start out by opening a savings account which can suffice for basic savings needs. As your financial situation changes and your savings balance grows, you may be able to benefit from additional savings options that can increase your returns and solve for specific financial needs. Here is an example of a three-tiered savings strategy using three different vehicles:
Start Basic: Everyone should have a basic savings account for short term needs. These accounts require a minimal amount to start and can be linked to a checking account for easy transfer of funds, to and from. They generally offer the lowest interest rates; however, they provide greater access to funds.
Earn Higher Rates: Once you have accumulated a sufficient short term fund, you could have your savings that exceed a target threshold transferred into a money market account. Money market interest rates tend to be higher than savings rates, while still providing access to your funds. Most money market accounts require a higher minimum deposit and also have minimum balance requirements, so these should be used for longer term needs.
Think Long-Term: With a short term savings and a money market account as your liquidity cushion, you could then consider a Certificate of Deposit for higher returns. CDs are time deposits of varying maturities. The longer the term of the deposit, generally the higher the interest rate that is earned.
#2. Build a Savings Cushion
Saving money can sometimes seem almost impossible. Unexpected expenses or the temptation to spend can make even the best plans to save unsuccessful. Yet having a financial cushion is one of the most important things you can do to feel financially secure. Here are some ideas that may help:
Saving money is usually a case of self-discipline. It may be hard, but having a savings cushion can provide financial peace of mind and a source of funds when needed.
#3. Use Automatic Savings Programs to Reach Your Financial Goals
One of the simplest and most effective tools you can use for almost any savings goal is an automatic savings plan. Automatic savings programs generally come in two forms; your employer deducts a certain amount from each paycheck and deposits it into a specific account or your financial institution moves a certain amount from your checking account into a savings account on a regular basis. These automatic transfers add discipline to your saving.
People with these plans find they do not even notice the smaller amount they have to spend each month. Start putting automatic savings plans to work for you:
Taking actions to regularly save or transfer money can be easily delayed or forgotten. Having your financial institution do it for you can make the process easier and more effective.
You will feel grateful in the future if you put plans in place to save money now. Visit https://www.sandyspringbank.com/personal-banking/savings.aspx or call 800-399-5919 to learn more about how Sandy Spring Bank can help you with your savings needs.