Tips for managing your savings account

Do you have a savings account? Or do you spend everything you take home thinking that someday you will be able to save some money?… Well, that someday should be now! If you don’t start now, when will you start?

How much are you saving each month? Are you saving the recommended 10% of your take home pay? One easy way to save is to “pay yourself first”. You should set up your finances so you are putting money into savings before you can spend it. For me, it means having a percentage of my earnings go directly into a savings account and the balance in to my checking account. This works well for me since I tend to spend what I have available in my checking account each month.

Now you might be thinking that there is no way you can survive on less money each month, “I cannot afford to save anything”… You might be surprised to find that you can. In fact you probably cannot afford to not start saving now. What will happen when that “rainy day” arrives or when you retire? If you think that 10% of your earnings is too much to save then start with 5% and commit to gradually increasing the amount you are saving each month. You will be surprised at how quickly it all adds up.

Now, if you are in debt, commit to paying your credit card debt off first then add to your savings account. The reason being is that it is almost impossible to earn as much interest on your savings as compared to the amount of interest that you are paying to service your credit card debt.

Here are a few tips that I have personally used:

• I signed up for the service that my bank offers of automatically transferring a set amount of money each month into my savings account. This way I don’t have to remember to do it every month and I don’t get the chance to doubt if I should do it or to delay it. And when I remember that I have the automated saving service, I am happy when I look at my growing savings account balance.

• When I accumulate “excess” money in my checking account, I transfer it into my savings account. A good way to do this is to determine the amount of money you need to have in your checking and move any amount above that into your savings account. Also if someone steals your checks or checking debt card, the damage they can do is minimized. It’s a smart thing to do.

• From time to time, shop around for the best interest rate. Websites like Bankrate.com are a good resource for comparing current interest rates. Your current bank may offer a better savings account rate but you don’t know it yet. Sometimes you have to ask if you are eligible for a higher rate. I just asked my bank about a better rate and they said that they could switch my account type to another type and I would be able to earn 5% on my money instead of the 1.75% that I had been earning.

• When I accumulate 6 months worth of living expenses in my savings account, I transfer half (or 3 months worth) into a short term certificate of deposit (CD). This allows me to earn a little more on my money but still keep it liquid should I need it.

• When my short term CD’s mature, I move the money into long term investments.