3 Steps to Building Savings
Posted on Nov 7, 2011 in MoneyEven when the economy is strong, there are times where you want or need to save some extra cash to pay off debts or make large luxury purchases. Sometimes it just seems like money slips away. Every time you see your bank balance it is the same or worse than the last time you checked. Fortunately, a few simple things can help you hold on to more of your income.
Use cash not credit. Credit cards are easy to use and frequently offer all kinds of incentives for you to use them. The problem is that they are so easy to use to that you no longer feel like you are spending money. If you pay for everything in cash, you have a much better sense of how much you spend since you have to physically handle all the money. If you use smaller bills, you will feel like you have spent even more.
Leave your money home. When you go out consider leaving your wallet or purse home. This prevents you from spending money on impulse purchases, allowing you to consider if you really need to buy the item in question. If you need to spend a few dollars on quick buys at the coffee shop or convenience store, limit yourself to the change left over from larger purchases, such as the groceries. Only take your money with you when you are specifically going out to buy something.
Budget your income. Setting goals and making plans are important steps to success as many things and money is no exception. Consider how much you want to save each month; then look at your income and necessary expenses. If you treat the money you want to save like another bill you have to pay every month, it becomes a lot easier to save. It also helps if you use a separate account for saving since that will make another distinction between it and money you can spend.
If you receive an unexpected windfall or have spare cash sitting in your current account, it is a good idea to open a high-interest savings account. However, there are so many different accounts on the market that it can be confusing and difficult to find one that exactly meets your needs.
The first question to ask yourself is whether or not you would need immediate access to your savings, should an unforeseen financial emergency arise. If this would definitely be the case, an instant access account would be the best option for you.
Before opening an instant access account, check how long it will take for withdrawals to be processed. If you have a postal or telephone account, it may take several working days for the money to be transferred from your savings account to your current account. If you have a branch-based account, however, it may be possible for you to withdraw cash in person on any working day.
If you would not be completely dependent on your savings in a financial emergency, a notice account is perhaps the best choice. Notice accounts usually pay a higher rate of interest than instant access accounts, but you have to give a certain amount of notice before making a withdrawal. Notice periods vary from account to account, but 30, 60 or 90 day notice accounts are common.
Once you have decided to open either an instant access or a notice account, the next step is to compare the interest rates offered by each provider. Comparisons of interest rates can be found on various websites, including money facts, and in the weekend newspapers.
Another factor that you need to take into consideration is how you want to operate the account. If it is easy for you to visit a bank or building society branch, you may opt for a traditional account operated by making transactions in person.
