You’ve heard it before: a penny saved is a penny earned. But, did you know that some savings accounts are more beneficial to your wallet than others? Since the method in which you save plays a part in how much your money grows, it’s important to know which type of savings account will work best for your saving needs and spending habits. Take a look at some best practices to make sure you are planting your money in the right places.
1. Compare a traditional savings account to a money market account
To determine which option is right for you, you need to first understand the key differences. Additionally, if you’re a member at a credit union, remember that traditional savings accounts are known as “share savings.” These have withdrawal options that are limited to electronic transfers and visits to physical branch locations. They also tend to yield lower dividend rates because of their minimized fees and balance requirements. On the other hand, money market accounts are ideal for building an emergency fund or depositing larger amounts of money due to its higher dividend rates. Additionally, they feature better rates and the convenience of check writing, but often require a higher minimum balance.
2. Learn how to choose the right account
It’s important to consider whether you are saving for a short-term or long-term goal. When you are first looking to build your savings and may be limited by deposit or balance minimums, a traditional savings account will still protect your money while slowly helping it grow. However, if you have a large amount in savings or plan to keep that money in the bank for a longer period of time, you can watch your money grow at a higher rate with a money market account. With Sharonview Federal Credit Union, a money market account can easily be added to a savings account by calling or visiting a nearby branch location.
3. Determine the target amount of money you’d like to have in savings
If your goal is to build an emergency fund, calculate three to six months of living expenses and work toward that amount. While this amount varies person-to-person, it provides a financial cushion for unplanned scenarios or expenses, such as job loss or healthcare costs. Before you finalize that target amount, double check that you have included all monthly expenses, small or large, such as housing, utilities, food, transportation, and insurance.
4. Now it’s time to build up those savings
Once you’ve settled on the right account for you, you can begin to build up your savings to reach that target amount. Whether it’s a new car, vacation or simply a dedicated emergency fund, proper budgeting and living within your means will make that goal a reality. Start by dedicating a reasonable amount of your paycheck to your savings, and deposit this money at the beginning of the month. You can also use resources, such as Sharonview’s online banking tools, and make automatic deposits into your savings account to commit to a healthier financial future.
Whether you are planning to buy a new house or are just looking for the comfort of financial stability, knowing how to save and what account is right for you will set you in the right direction. If you have a goal in mind and do your research, it may amaze you how quickly your savings can grow!