How to get serious about your savings
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With busy schedules and many demands on your income, saving money can often be an afterthought. In reality, saving is the most likely catalyst for your future financial security. Whether gearing up for a big life event, covering an emergency or creating seed money for your investments, it all starts with saving early and often, at a bank where you feel comfortable.
According to Kimberly Palmer, senior editor for U.S. News & World Report, "Savings accounts at banks remain the best way for lower- and middle-income Americans to save money, especially since bank accounts are insured (up to $250,000 per depositor) by the federal government. And savings accounts offer an essential buffer against costly and unexpected life events."
It's never too soon or too late to build a better financial foundation by getting serious about your savings. Here are three good tips to consider when getting a savings plan started.
Make it a habit
Because life has a way of interfering with even the best-laid financial plans, it's important to start now and save regularly. A study by the National Bureau of Economic Research shows that high-income households have just as much trouble saving money as low-income households. Avoid the easy trap of feeling that you don't make enough to save a little something every month.
Like most self-improvement programs, it's good to start small and be encouraged by your progress. Set achievable savings goals and build on them to eventually stretch yourself as circumstances permit. Choose a bank with an interest rate and/or features that work best for your personal goals, then take that first step and create an account.
Some people prefer to set up several accounts so that one can be used for short-term savings while another focuses on long-term goals and gets "forgotten" as it continues to grow undisturbed. By jumping in and creating a savings account of any kind, you'll be making that important first move toward preparing your family for a more successful future.
Put it on "auto-pilot"
To keep you on track with minimum effort, try automatic savings. You'll be amazed at how your deposits accumulate while you are busy enjoying the business of living. In time, you won't even miss that auto-deposited money as you naturally adjust life around it.
Stephen Brobeck, executive director of the Consumer Federation says that automatic savings is one of the most effective ways for Americans to save. That's why programs such as regular deposits into savings accounts are popular. Brobeck continues, "Virtually every bank and credit union will allow regular preauthorized deposits from checking to savings, and every consumer, particularly if they're having difficulty building liquid funds, should take advantage of that opportunity."
Those that have direct deposit at work can ask their employer to deposit a specified amount of their paycheck right into a savings account. Don't have direct deposit? That's okay too, since most banks are able to link checking and savings accounts together and set up automated transfers at intervals of your choosing.
Expect (just a few) rainy days
According to a recent Bankrate poll, only 38 percent said they could cover an unexpected expense such as an emergency room visit or car repair with cash in a savings account. And, falling prey to current purchasing temptations is always a formidable obstacle to any savings plan.
So why do we spend now rather than save for later?
"Sometimes it comes down to not having a clearly defined goal," says Todd McLaughlin, Macomb market manager for Flagstar Bank. "A good place to start is that rainy day fund, making sure you have three to six months of what you typically spend in a month in reserve."
Trent Hamm of "The Simple Dollar" website says one great way to start is to set a goal that's reasonable. Make it your initial goal to have an emergency fund of just $250 or $500. That's a goal that you can reach in just a few months (or even less if you're in a good income situation), and yet it's an amount that can make a huge difference when you have an emergency.
McLaughlin also advises to be forthright about your finances when opening an account so that your banker can steer you in the most helpful direction. "That's the time to ask additional questions, he says. "Be prepared to share things you may be struggling with." He advises to come into a branch and interact with the staff to get the best idea of how the bank can help you save.
Remember: Banks want your money to grow to ensure your business for years to come. If you have questions about planning for your future, a Flagstar banker would be happy to discuss options for meeting your short- and long-term savings goals. Find a branch near you.
Flagstar Bank has been in business since 1987 and is the largest bank headquartered in Michigan. It is a full-service bank and a top 10 national mortgage originator. Member FDIC. Equal housing lender.
This story is provided and presented by our sponsor Flagstar Bank.
Members of the editorial and news staff of The Detroit News were not involved in the creation of this content.