Posted on: 10 March 2021
When it comes to handling your money, it is important to have somewhere to put money that you want to save outside of your checking account. That is where a personal savings account comes into play.
Set Up the Right Type of Savings Account
First, you are going to want to set up the right type of savings account. A basic personal savings account is generally connected to your checking account, allowing you to quickly transfer money from your checking account to your savings accounts. The interest rates tend to be extremely low, so don't expect to earn a lot of interest on your money. You can pull out money six times a month, as set by the federal government for savings accounts, without facing any fees.
You can also put money into other types of savings accounts. High-yield online savings accounts can make you more money but take longer to transfer money between accounts. Money market accounts allow you to earn more interest on your account while still accessing the money with a checking account or debit card. Certificates of deposits are great when you have the money you don't want to touch for a while.
Start Saving Modestly
Second, when it comes to savings, you don't want to go so big that you don't have money to cover your day-to-day expenses. Start by setting a modest savings goal that will allow you to put money towards your savings but will not put you in a bad financial situation in your day-to-day interactions.
For example, start by trying to save just 1% of your paycheck, increasing by half a percentage point until you reach at least 10%, aiming for saving at least 20% of your earnings.
To make savings easier, use direct deposit so that you are automatically submitting money to your account without having to think about it.
Set Savings Goals
Just putting aside money is helpful but may not be the most motivating; that is why it can help to have savings goals. For example, you could have a big saving goal to have 90 days' worth of emergency savings, with smaller goals of reaching 30 days of emergency savings and 60 days of emergency savings.
From there, you can start other savings goals for things like a down payment or a new car. You can put all the money into one savings account and track the money that is going towards each goal, or you can open multiple savings accounts for your different goals.
Having a savings account is important. The easiest and simplest saving account to set-up is a personal savings account; although there are different types of savings accounts, you can access them. Start modestly, and slowly save more of your income each month. Set savings goals, and track your progress towards your goals to build motivation.Share