With interest rates still near their historical low point, you may be wondering how to go about effectively building a savings account that grows and helps you achieve your goals for the future. Here are three great ways to help you get started with a savings account.
Use automatic deposit to fund your account
The best way to get your money into savings is through automatic deduction from your pay check. Some people call this paying yourself first. This is a great way to build savings because you don’t need to think about it and automatic deposit requires far less financial discipline than choosing to make the transfer from checking to savings each month or week.
If you use the same institution for both accounts, they may even offer you a slightly better interest rate or other perks for opening the new account. Another option is to shop around for the best rates and perks, although you should definitely read the fine print and make sure you understand the limits on the account in terms of withdrawal or deposit frequency and penalties.
Consider enrolling in rounding programs
These programs vary from one financial institution to another, but the general idea is that all your debit transactions are rounded up with the difference deposited directly into your savings account. These are tiny amounts – always less than $1 – but over time, they can add up and do so painlessly. This is a great choice for frequent debit card users and for those who find excuses not to deposit regularly into savings.
Be aware that some programs have set limitations on the amount you can roll into savings using this method. If you are aiming to save a large amount quickly, you will need to employ other strategies as well, since this one is designed to be effortless, if not very efficient.
Set specific goals for your savings
Having a goal in mind can making saving easier. Instead of feeling as though you are simply pouring money into a black hole, having goals gives you something to envision as the result of your discipline and hard work. For some people, that goal might be a new car or a house, or taking a trip to an exotic destination, starting your own business or a family, or even having a well-padded emergency fund. The possibilities are endless, and they may change over time.
When choosing your goals, it may also help to set a projected completion date to help keep yourself on track for meeting your goal. If your goal is to build a nest egg, then you may choose an evaluation date to help make sure you’re saving as much as you intend through the methods above and others that you will doubt discover as you build up your savings account.