Savings accounts are one of those things you can easily forget you have. Sure, you might deposit some birthday money in there once a year, or maybe even some of your tax refund, but for the most part it just sits there.
It’s also easy to get caught up in other savings vessels: your 401(k), IRAs, Health Savings Accounts (HSAs), etc. While these are all important components of your overall financial plan, that doesn’t mean your savings account should collect dust.
Easily Accessible Funds when You Need Them
When you’re looking to save, you’re typically looking to invest your money in a way that maximizes returns. The problem when you hyper-focus on this goal is that you often lose liquidity with these types of accounts.
A traditional savings account will give you access your money if you need it. Many accounts have limits to the number of free transactions you can do per month, so it’s still designed to be for saving rather than spending.
An emergency fund is a must-have for everyone, and that fund is best kept in a savings account you can easily access if necessary. The key is to determine ahead of time what classifies as an emergency – medical expenses are car repairs are the two big ones, but you might also have some others.
Automate Your Savings
Remembering to deposit money in your savings account can be hard. And even if you do remember, it can be even harder to part with the money. That’s why you should automate your savings and “pay yourself first.”
Chances are you’ll be able to set up your paycheck to direct deposit some of your money into a savings account. This means you won’t even need to see that money in your checking account, so it won’t feel like you’re missing out.
Separate Funds are Important
You might feel like you can train yourself to save money with just your checking account. It’s not impossible, but willpower is something that can be exhausted. And sites like Amazon with their 1-click purchase mechanism make spending so easy.
A separate account will not only help you be more organized, it makes that struggle with willpower much less. Some people even opt to have their savings in a separate financial institution, but that’s only necessary if your urge to spend is too much.
Create Your Savings Plan
Need to start an emergency fund? Or preparing to make a big purchase? Whatever your goal is, let a savings account help you.