The recent financial crisis has brought home the importance of increased savings for many people. Of course, with interest rates provided by banks at a historic low, some people avoid saving even while they know they should. For those prepared to dig a little deeper in their pockets, the good news is that there are ways you can maximize how much you save and earn whilst keeping it safe and protected as well.
First, as Nike so famously says, “just do it.” Start saving. It doesn’t matter how little you put away, the whole point is to get in the habit of saving. In financial circles this is called “paying yourself first”, and it’s the primary habit of people with ample cash in the bank. At an absolute minimum everyone needs some sort of emergency fund with cash that can be accessed for car repairs, leaking roofs or other unforeseen expenses. This will serve you doubly well because you can earn interest on your savings rather than paying interest on a loan when these expenses eventually arise.
Second, protect that investment. Choose a bank that has an excellent credit rating as well as excellent customer service and a wide variety of products. As your savings balance increases, you may wish to diversify and place some of your funds into “laddered” certificates of deposit, money market accounts, mutual funds, unit investment trust funds or other vehicles where you can invest extra cash. The best savings account when you’re just starting out may not remain for a long time so once you’ve accumulated some funds, shop around and choose the best ones which can provide the highest interest.
Once you’ve accumulated some savings, make it a point to keep track of what you have. Whether you use an electronic method or paper. Knowing your balances will not only encourage you to save more, but ensure you know exactly where you stand and are immediately aware if any problems crop up. This is exactly what I do on a monthly basis. An account that you can monitor via your computer or smartphone is ideal. The moment you have a question you can log on and verify any transactions.
Consider bonuses when opening an account, but don’t get complacent. While a bonus may well provide extra interest on your funds, keeping your money in that account after the bonus expires may actually cost you money. Savings institutions often count on the “perceived pain of switching” to help keep customers at a bank, but when an account’s interest rate has dipped to near zero, it’s time for you to look around at what else may be available.
To keep on top of your savings, make yourself a note and check your savings and investment accounts at least every quarter. What is the balance? What is the interest rate? Have you been assessed any fees in the interim that you were not aware of? If what you see makes you unhappy, shop around.
When considering any account, be sure you read the fine print! Current accounts, ISAs, savings accounts and certificates of deposit are just some of the types of accounts that can earn you a very good rate of return—but some of them come with restrictions, so be sure you’re aware of any before signing your name to the account.