Are savings accounts worth it? Yes! Opening a separate account for money you don’t intend to spend anytime soon, and making sacrifices to put money in that account, will pay off big in the long run. You’ll be able to save money for emergencies so you can make ends meet even if you have an unexpected expense. A savings account can also help you save up for big goals, such as a down payment on a home, a vacation, a new car, or college tuition.
Savings should be part of anyone’s financial goals. So how do you create a savings plan? Let’s explore some basic ways you can start setting aside money for savings—and how to stick to your savings plan.
How to Create a Savings Plan
These ideas will help you create your own plan for building up a personal savings account. Since there are different methods and approaches to take, the key is to find one that works for you.
Examine Your Spending
Do you know how much you spend every month and on what? Most people don’t—and that is one of the most basic financial mistakes you can make. Look back at your bank and credit card statements over the past few months and see how you have been spending your money. Some of these expenses will be essential, such as rent, utilities, groceries, etc. Others you might be able to cut back on, including subscriptions, entertainment, and eating out.
Make plans for how you can cut out unnecessary spending, and don’t be afraid to start small: If you eat out for lunch every day, cut back to three times per week. If finances are tight, consider increasing your income by taking more shifts at work or looking for a side hustle or better-paying job.
Make Savings Goals
Why do you want to save money? You know saving is important, but why is it important to you? Are you worried about how you’ll help your teenage daughter attend college in a few years? Do you want the peace and security of knowing you have cash set aside for retirement or an unexpected expense? Have you been dreaming of a vacation to Cancun? Write down why you want to save and about how much, and use that to motivate you.
Don’t be afraid to make your savings goals simple and modest at first. A true emergency fund will have enough to pay all your living expenses for six months to one year. That number can be daunting, so it might be easier to start with a smaller goal and work your way up.
Automate Deposits into Savings
If your employer offers direct deposit, you may be able to send a percentage of your paycheck directly into your savings account. Another option is to set up automatic transfers with your bank, so money in your checking account is automatically transferred to savings on payday or at the beginning of the month. This way, you don’t have to think about putting the money into savings.
Pick the Right Savings Account
When it comes to savings accounts, you have a number of options. The easiest option that gives you quick access to your cash is a traditional savings account with your bank. These accounts offer some earning potential through interest, but the rates are fairly low. You might consider getting a high-yield savings account, typically from an online bank, which offers higher interest rates so your money will grow faster, but it will be less convenient to access funds when you need it.
How to Stick to a Savings Plan
Having a savings account and planning to put money into it is easier said than done, especially when you have holiday or birthday presents to shop for, find a sale at your favorite clothing store, or get tired of cooking at home every day. How do you hold yourself to your savings plan? Here are a few ideas.
Build in Rewards
If you eliminate all “fun” spending, you’re more likely to splurge big time during a low moment. Build in some money for entertainment or shopping for a fun, discretionary expense so you don’t feel deprived.
Remember Your Goals
Find ways to remind yourself why you are setting aside money for savings. If you’re planning for a vacation, put a picture of your destination on your fridge. Want to upgrade furnishings in your home? Make a shopping list that’s ready when you meet your savings goal. Set up calendar alerts on your phone to remind you regularly why you are saving. Keep the end in mind so you can fight temptation.
Learn from Mistakes
When you make a big, unnecessary purchase or get sidetracked from a savings plan, be gentle with yourself. Learn from your mistake, make changes if necessary, and move on.
Are Savings Accounts Really Worth It?
Are savings accounts worth it? Definitely! Learning to save money can take time, but with goals and a plan in place, you can do it.