In this day and age, many people seem to think having a savings account is a lost art. Personal savings amounts continue to fluctuate in the UK, while in America, they’re simply declining. However, there are huge benefits to saving at least a portion of your income.
The Emergency Fund
Things are still unstable enough in the world’s job market that no one can count on security in their job. There’s also other emergencies that can pop up in life, such as an unexpected medical expense or home repair expense. An emergency fund of at least 3-6 months’ worth of expenses saved would help to ensure that an unexpected job loss, major medical expense or household repair could be covered without bringing financial harm to your family.
The Rainy Day Fund
Another great reason to have an ample savings account is to cover unexpected opportunities. You never know when a great opportunity may arise to take a trip to another country, or to get a great deal on a car, business or other investment. Lack of a savings account to cover these chance happenings could mean a lost opportunity to make money or fulfill a dream.
So how can you increase your savings rate? Here are five tips:
- Make it automatic. Have your bank automatically deduct money from your checking account and put it into a savings account each payday or each month. If you treat it like any other bill, you won’t miss the money and it will grow quickly.
- Maximize your return. In order to get the best return on investment for your savings accounts, it’s crucial to shop around. All banks are not the same in terms of what they pay in interest on a savings account. In order to get the best interest on a Cash ISA, you’ll need to do some shopping around.
- Don’t touch. If you want to continue to grow your savings account, make it a rule that unless you come across a valid reason, you’re going to simply pretend the account doesn’t exist in order to maximize your savings. In other words, don’t touch your emergency fund unless a true emergency arises. Have specific guidelines in which you will withdraw money, and don’t deviate from the rules you’ve set.
- Find extra money. Make it a point to find extra money for your savings account or Cash ISA by using tax returns, wage increases, or garage sale profits and putting a set percentage of that “extra money” into your savings account.
- Cut your expenditures. Look through your monthly expenditures and see where you can cut costs, and make a commitment to put that extra money into your savings or Cash ISA as well. Since it’s money you were already spending anyway, it won’t hurt when you put it directly into your savings account instead.
Saving money really is simple once you’ve committed to doing it. And by maximizing your interest earnings by taking advantage of great rates at places like BM Savings, you’re following the crucial rule of wealth by making sure that your money is working for you.