Most people set saving goals. Whether it is for your dream house or a family vacation, savings help you achieve your financial goals. But, are you saving enough?
Managing your money is quite challenging. You may be earning a good income, but that doesn’t mean you are saving enough for your future. More savings means a higher return. That’s because banks pay you interest on the amount you deposit in your savings account. So before you open a savings account, check out the common saving mistakes you must avoid.
1. Not Comparing Your Options
A high-yield savings account is different from a standard bank account. It pays you a high interest, which means better returns. Similarly, banks have different offers on savings accounts. For example, some banks pay up to 25% higher than the normal interest. Of course, if you start a regular savings account, you will earn decent interest. But, if you want to grow your money quickly, consider a high-interest savings account.
Always check your options and choose a bank that offers the best interest with flexible deposit and withdrawal terms. Once you have found the best bank, you can opt for an online saving account opening if the bank operates online. Then, you need to fill the form and submit it with other required documents.
2. Taking Out Money from the Savings Account
You are saving for a financial purpose. So, how will you fulfil your goals if you withdraw money from the savings account regularly? First, do not cash out money from these accounts. Instead, open an emergency savings account for emergency requirements. You can open separate savings account with different banks. So, use this option if you think you will need to withdraw money regularly.
3. Skipping Savings
Never consider savings as an optional expense. Just like how you pay your bills on time, you must deposit a certain portion of your income into the savings account every month. Make it a habit. Your savings must be treated as a must-pay item. To make it easier, choose the automatic transfer account. It transfers a fixed percentage of your salary from checking to your savings account automatically. That way, you will not be tempted to spend your entire income.
4. Saving a Small Portion of Your Income
The total amount you should save every month depends on your income, expenses, and financial goals. If you need money for a house or an expensive project, consider saving at least 15% of your income. Make a goal and stick to it. You can start with the goal of saving 10% of your income and increase it gradually. Reduce your expenses and start saving more each month. If you save more, you will grow your money quickly.
5. Not Having Separate Savings Account
Checking account and savings account are different. You should have separate savings account for your financial goals. The money in your savings account should not be spent on anything. Start multiple savings account for different financial goals. For example, you can open separate savings account for vacation, retirement, and emergency requirements.