5 Practical Ways To Save Money For The Future
Saving money - that's the one thing we all wish we were good at, but really aren't. We are encouraged to save from a young age (remember those breakable piggy banks?) but most of us as adults disregard savings for taking out loans on things such as houses and cars. The fact is, savings are essential to any good, well-managed budget.
Without doing so, we are at the mercy of money lenders. In life, there are those rainy days where big amounts of cash will be needed in a short amount of time. Without a savings account, you will be forced to take out personal loans, such as $500 payday loan or even bigger amounts.
Basically speaking, if you aren't saving money right now, you are setting yourself up for a world of trouble in the future. Money saved now will help you pay off debt later, invest and earn passive income, or help you out in emergencies. As with all other money matters, there are rules to saving too. Some ways are better than others.
If you are interested in starting to save money, or want to better how you are already doing that, consider the following tips:
1. Choose a High-Interest Generating Savings Account
Banks offer a variety of such accounts that you can choose based on your personal needs. If you are aiming to save for the long haul, choose a high interest generating one. These accounts are ideal to save for retirement or an expensive venture you intend to undertake in the future. High interest generating accounts, however, are not flexible.
You will be required to deposit a minimum amount each month, and the bank should be usually notified at least a month before you want to make a withdrawal. Obviously, such accounts may not be ideal as your emergency fund, but they will be great for your needs a decade or two from now.
2. Have Multiple Savings Accounts
If you save money for different purposes, you will need to have multiple bank accounts. For example, if you want to save money for a vacation to Hawaii, and also for retirement, one account will not do. Saving money for things like vacations is a short-term goal. You will need an account where you can easily withdraw money from when you finally get the time to travel.
Saving for retirement, on the other hand, is a long-term goal that you will need to commit to for decades. For such events, it's better to have a high-interest generating savings account as mentioned above. Likewise, open multiple savings accounts for the things you need. Doing so will make managing your money easier.
3. Allocate Savings
When you were little, you may have put extra dimes or nickels in a piggy bank if you had coins to spare. As an adult, you cannot save money when you have extra to spare. Saving money is a commitment. It should be included in your personal budget, so you will have cash each month to deposit in your accounts.
How much you should allocate each month for your bank accounts will depend on your personal needs. If you are saving for retirement, the general rule of thumb is to put aside at least 10 percent of your income. Ideally, you should save at least 30 percent of your income each month, unless you have serious debts to pay off first.
4. Invest in Fixed Deposits
Once you have collected a considerable amount in a savings account, a good next step would be to put it all into a fixed deposit. Fixed deposits generate higher amounts of interest rates than savings accounts, and are a good and safe way to invest your funds. Fixed deposits incur little to no risk if you get one from a bank that guarantees your money back in case of a bankruptcy.
Fixed deposits mature over one, two or five years, during which time your money will grow, but you will not be able to make withdrawals. Therefore, fixed deposits are a great way to save for long-term goals.
5. Make Automatic Payments to Your Savings Accounts
Saving money is not a choice, it is a habit. Most people struggle with disciplining themselves to save money on a monthly basis, even after they have committed by opening an account. Naturally, when we have money at hand, we are more inclined to spend it than to save it. This is how people squander money on impulse buys without saving.
If you wish to avoid such a fate, opt for automatic transfers to your savings account. Once you have decided the amounts to allocate for savings, you can ask your bank to automatically transfer that amount to your accounts from your main account each month. It will also save you monthly trips to the bank.
Saving may not be easy, especially if you are in debt. However, like eating food or sleeping, this is essential to ensure your future survival, financial wise.