How to Manage Your Savings Account
Savings funds are important to financial success because they are the key to meeting financial goals like buying a house or staying out of debt. They can also provide stability and security to your personal finances by giving you financial support when your funds are running low.
Typically, a savings account fund has a clear goal. For instance, an emergency savings fund is specifically for unexpected but minor financial setbacks like a medical emergency or a car repair. There is also the common but understated retirement fund, which is a savings fund dedicated to your monthly expenses once you retire.
However, there is also the option of a savings account fund for more specific financial goals like a vacation or a getting a brand new car. When it comes to your savings account, it is best to set clear and specific goals in order to get the best results and keep your finances on track. In the following section we will detail the ways in which to manage each form of savings account.
Your emergency fund is for unexpected financial issues.
As mentioned previously, an emergency fund is meant for unexpected financial setbacks. By having an emergency fund, you can protect yourself financially against temporary unemployment, unexpected medical bills and unexpected costs from repairs (i.e. car damage, home repairs, etc.). An emergency fund can provide you with the financial support necessary to keep your personal finances stable and
There are a few ways you can setup an emergency fund. One option is to open a separate savings account with your already established financial institution or bank. Try to keep your savings account separate from your checking account so you avoid spending your savings funds. Also a separate savings account will also make it easier to track the growth of your emergency fund much more easily.
The best way to guarantee an emergency fund is to deposit a considerable amount of funds into your savings account on a regular basis. Think about allotting 5% of your monthly income toward your emergency fund or depositing consistent amounts on a weekly or monthly basis.
The more you contribute toward your savings fund, the faster it can grow and the more money you have when facing a financial disaster.
Your retirement fund is for financial support once you retire from your career.
Another form of a savings account is a retirement fund. This savings fund is to act as your monthly income once you retire from working. A retirement fund will provide funding for your needs and obligations in your older age. It is never too early to save money for retirement, the sooner you start, the greater the potential is for saving.
One of the more common forms of a retirement fund is a 401(k) plan. This is a retirement plan sponsored by an employer in which a worker can save and invest a piece of their paycheck before taxes. Once funds in the account are withdrawn, taxes will be paid. Most employers offer a “matching” option, in which an employer will match your annual contribution to your 401(k) plan up to a certain limit. For instance, if you contribute 5% of your annual salary to your 401(k) plan, and your employer matches up to 7%, then your employer will match your contribution exactly at 5%. As a result, you will grow your 401(k) by 10% of your annual income, or double the rate of your contribution.
If you do not have the option of an employer-sponsored retirement plan, there is a form of retirement savings known as an Individual Retirement Account or IRA. An IRA is retirement account setup through a financial institution. An IRA is a way for you to save money for your retirement at your own pace and without feeling limited by your employer. You can contribute to both a 401(k) and an IRA at the same time.
Savings accounts with specific goals are the best for meeting financial goals.
A more specific savings account, with a clear objective, like saving for a new car, can make reaching your goal easier. You will have the advantage of knowing your exact goal, allowing you to map out your savings plan in detail and ensure you achieve your goal.
A savings plan with a distinct objective is good for short-term goals and for staying focused. In addition, seeing your progression will keep you motivated and accountable as you get closer to accomplishing your goal.
No matter what savings account you intend to open or start, make sure you have a target. Savings accounts are vital for financial success and achieving any future goals. It is never to early to start saving and improving your personal finances.