There are many ways to save money, but how do we know how much money to set aside? When looking for a savings benchmark, people often look at their age and think; how much should I have saved by [insert your age here]. I’m sure you can do a search and find out the average net worth for your age group, but it gets muddled by things such as your student loan debt or retirement planning. As an upstanding financial institution, we recommend a better way. Because the average savings by age is variable, we suggest using the common rule of emergency savings being equal to three to six months of your regular living expenses.
The Savings Goal.
The 3 to 6-month rule to building a nest egg. How much should I have in my savings?
The standard rule of good banking practices aims to keep three to six months of living expenses in a savings account. When first opening an account, try to begin your savings with $500 and build up to your three-month savings goal quickly, then slow down a bit and build your six-month reserve over time. We understand that most people can’t open a savings account with a massive six months worth of expenses. So, plan on building your nest egg up slowly to meet your savings goal.
If you still want to look at your average savings by age, we recommend viewing your statistics by median net worth, not average net worth. By using a median net worth, you’ll eliminate those off-balance highs and lows. Using the net worth over an average general savings by age comparison also helps account for debt often seen at specific times in life, as well as the growth of assets over time.
Keeping a savings goal on track.
Don’t fall prey to starting a money savings plan and failing to follow through with it.
The goal to success is sticking to the plan. A quick way to make certain you stay on track is setting up an automatic transfer from your checking to your savings account. If you’re like most of us, our wages drop into our checking account on a weekly or monthly basis. Setting up an automatic transfer ensures you keep building to your desired budget without thinking about it. An automatic transfer is a simple way to stay on track without fail. Life can be hectic, and making saving money worry-free and straightforward helps you keep up.
Another way to stay on track with your savings goal is to make a budget that you can stick to. When it comes to budgeting and saving money, the savings part of your budget is always the first thing to go when things get tight. Therefore, we always recommend creating a budget that you can stick with. You can read about how to make a budget with the 50/30/20 method.
Finally, Money FCU also has free financial advisors who can help you work through how to build your budget. A financial advisor also can advise you on a money savings plan. Financial coaches sit down with you and design a manageable action plan to reach your monetary goals. Speaking with a professional is always a great place to start. It’s nice to know that with Money FCU, you can get free help to build healthy financial habits and design a plan for your success.
Raising net worth.
Our second savings benchmark is raising our average net worth.
After you’ve hit your desired money savings goal, it’s time to begin thinking about alternate savings accounts. Now is the time to raise your net worth and save something that brings a higher yield on your investment. We want to make your income work for you, not stretch by month after month. So, with your personal savings account now on track, it’s time to start investigating a savings account that yields a higher savings rate and thus provides additional compound interest.
With a certificate or high yield account, your savings balance grows faster while using the same amount of money set aside. We do not suggest starting your original emergency savings in these accounts because it often ties up your cash or makes it not as easily accessible. Hence, if there was an emergency, you don’t have the emergency funds available to you. Yet, once your debt is under control and your emergency fund is comfortably set aside, high yield accounts are outstanding for building your funds quickly. Check out Money FCU’s money market accounts and savings certificates.
Money savings account.
Choosing what style of savings account is right for you.
Everyone’s life is different, which is why there are so many types of cash savings accounts. Before you decide on what version best fits your lifestyle, let’s look at how you use your household income and bank. Ask yourself these questions.
How will you use the money savings account?
Suppose you’ll access the account frequently to move or withdraw money often. In this situation, the basic savings account is likely best. When using this cash savings practice with a credit union’s personal savings account, you’ll have funds easily accessible. You also will not see early withdrawal fees or other penalties that some high yield accounts or banks may impose. The credit union personal savings account is generally a worry-free account. Making transactions through a credit union comes with rewards. It does not come with many clauses and obligations to consider, such as early termination or monthly maintenance and service fees. By far, a credit union personal savings account is the most straightforward account to manage your nest egg and still see a return on your investment.
What essential savings account features will you need?
The features of each account are about what is important to you. Is mobile deposit a feature you use frequently? Do you want the freedom to deposit and withdraw money as needed? If so, try a traditional savings account or money market account.
When building savings for a specific purpose, consider a holiday, vacation, or U-name it account. Think about the features you use, how often you use them, and what features you are likely to use if you had them. The idea is to choose the best account to work for you.
Are the fees and rules for this savings account something I’m prepared for?
Once you’re aware of any fees and rules that come with an account, it’s easy to prepare for them. Here’s a quick glance at some of the things to understand and prepare for:
Watch for any monthly service charge or monthly maintenance fees, and be sure your benefit exceeds the cost.
Be knowledgeable of any account that requires a minimum deposit or must maintain a minimum balance. Set this amount aside to avoid slipping below the requirements.
Be smart about early withdrawal penalties.
To avoid dipping into an account with an early withdrawal fee, make sure you have an emergency fund in case of an unexpected crisis. We also recommend keeping a budget. Keeping these simple guidelines in mind, you’ll control what account is best for you, avoid penalties, and reap higher rewards.
All things considered, each account has different features for various uses. We suggest reading through each account’s descriptions and taking a moment to decide what options and features are important to you in a money savings account.
Ready to get started saving money?
Money FCU has multiple consumer savings accounts to select from. Our friendly agents are always here to help you, use our virtual online assistant for text or live chat or call (315) 671-4000 to speak with a representative. Explore all your consumer savings options.