It’s the start of a new year, which means you have probably set new goals that you would like to accomplish in 2019. These may include financial goals not only for yourself but for your business as well. Setting detailed goals is a great way to make sure your financial future is bright. An easy way to get started is by opening a savings account.
What is a Savings Account and Why is it Important?
Setting money aside, whether it be each paycheck or each month, can keep your money safe and allow it to grow over time by accruing interest. A savings account can help you reach short term goals, such as building an emergency fund, or long-term goals like a down payment on a house.
Beyond a simple, basic savings account, there are two other types of savings accounts you can open that offer higher interest rates.
- Certificate of Deposit (CD): This allows you to lock in a rate and earn an APY (Annual Percentage Yield) by depositing a large amount of money for a fixed period, usually one to five years. Withdrawing your money early would results in a penalty, usually a fee.
- Money Market (MM): You deposit a large amount of money than basic savings account to earn a higher rate and must maintain a minimum balance to avoid fees.
Depending on your priorities and financial goals, there are many factors that play into which type of savings account you should open. When deciding what type of account is best for you, keep in mind: the less access you have to your money, the higher the rate and corresponding APY you’ll receive.
When to Open a Savings Account and Start Saving
When opening a savings account, one of the most important things to look for is if your account is protected through account insurance. Typically, savings accounts are federally insured up to $250,000. Look for “FDIC Insured” within the bank content online or at the branch.
Another thing to be on the lookout for when opening a savings account is a convenient way to check your balance. Look to see if the bank offers mobile banking services, online withdrawals, a local branch location, or an ATM. These types of features will make your account more user-friendly and easier to maintain.
Increase Your Savings, Decrease Your Debt
Now that you’ve opened an account, it’s time to start saving. One of the best ways to do this is by the 50-30-20 plan. This means:
- 50% of your income goes directly toward necessities like food, rent/mortgage, and bills
- 30% goes to splurges like a night out or a nice dinner
- 20% goes straight to your savings account
Other great ways to build your savings include:
- Separating your savings accounts
- Set up automatic deposits to your savings account
- Increase your income by finding new work or taking on other opportunities
- Try savings apps
Separate Your Savings Accounts
This may seem like a hassle, but it will ultimately help you in the long run. It might be beneficial to even change how you refer to your separate accounts. Calling it an “emergency fund” instead of a savings account, for example. You may also have another account for your child’s college tuition or a rainy-day fund.
A simple way to put money away into a savings account is by setting up an automatic deposit. When money is automatically deposited into your savings, you don’t miss the money from your paycheck because it will automatically be deducted before the rest is deposited into your checking account.
Increasing Your Income
If you are trying to build a savings account but find it difficult because of your bill to income ratio or large debts such as a car payment, student loan debts or credit cards, look for ways to increase your income. Whether that means finding a new job, or taking on a second position, increasing your income will not only allow you to start saving but also allow you to spend money on things you enjoy.
If saving money is often hard for you, try using a financial app as a tool to build your account. Apps like Digit, SmartyPig, and Qapital as great tools. These apps allow you to connect your checking account, then analyzes how much you spend and how much you can each month. Then, based on what you can safely afford, it transfers money to your savings account.
Decreasing Your Debt
One common misconception while trying to pay off your debt is that you should overpay every bill you have. In reality, it’s the complete opposite. According to finance guru, Dave Ramsey paying off debt is easy when using the Debt Snowball Method. How it works is relatively simple, you just pay off your debts in order from smallest to largest.
When the smallest debt is paid in full, you roll the money you were paying on the debt into the next smallest balance. It looks something like this:
- Step 1: List your debts from smallest to largest
- Step 2: Make minimum payments on all of your debts except the smallest
- Step 3: Pay as much as possible on your smallest debt
- Step 4: Once your smallest debt is paid, move up the list and pay as much as possible on the next smallest
- Step 5: Repeat until each debt is paid in full
Why is this method so useful? The debt snowball works because it is all about behavior modification. Once you modify your behavior, the debt will begin to decrease and paying off your loans/bills will become easier.
Savings Accounts at Union Bank
At Union Bank, we can help you keep all your finances in one place. A savings account is a great way to not only have quick access to your money but to also generate interest. We offer several ways for you to start increasing your savings today – whether it be a savings account or a certificate of deposit account.
- Minimum balance to open the account: $100.00 (waived for minors under 18)
- Two withdrawals per month allowed with no additional fee. A $5.00 fee will be charged for each additional withdrawal.
- A $5.00 monthly service fee can be avoided with a $250.00 daily balance in a statement savings account
Money Market Savings
- Minimum balance to open the account: $1,000.00
- Competitive interest rates are earned based on a tiered balance system. Interest rates increase as your account balance increases.
- A $10.00 monthly service fee can be avoided with a $1,000.00 daily balance in money market savings accounts.
Certificates of Deposit
- Minimum balance to open the account: $1,000.00
- Competitive interest rates are offered for terms of seven days to 60 months.
Now is the right time to open or expand your savings account. At Union Bank, we can help you make the smart choice when choosing a savings account and help you start setting aside money to prepare for your financial future.