Generally, savings is all about saving money. It is a behavior aspect than a mere financial concept. People in most cases, will start saving money only when they choose to make it an emotional priority in life. The real fact being that the Savings habit is much harder than what is actually believed or expected to be.
Apart from spending less amount of money, there are much more elements involved in this which makes the whole concept more challenging. It is very crucial to decide on certain factors like how much money need to saved, where money needs to be put or invested and how to determine whether money saved is safe.
In what ways Savings can help?
Savings can help in achieving a financial well being. It is necessary to instill the habit of saving from an earlier age and to continue this on a regular basis. More importantly, savings can help in building a specific reserve aimed to meet the varied future financial needs of an individual or family. By taking up this activity, individuals can achieve the long term living and security as well. People can likely kill their debts through constant savings. By eliminating the available debts, it is possible to re purpose money as possible reserves. Sooner the saved money is utilized to pay off the debts, the lesser amount of interests one has to pay. The best feature of saving money is that it initiates in increasing the total income through a well focused initiative.
Importance of making savings a Priority
People who intend to save for any major purchases, retirement or any other higher end needs will not end up reaching their end goals unless and until savings is made a priority. A common notion among people is that accumulating smaller amounts on a monthly basis will not really make any difference for significant financial needs. Making smaller additions in the saved amount on a regular basis will add up the total investment and in a way this total saved amount can be utilized for future needs.
It is always crucial to follow a systematic approach towards savings. As an initial step, individuals must make a rough budget to determine the different areas where in the whole income is possibly being spent. Prepare a record of expenses and categorize it. It is important to eliminate the needless expenses. Always dealing with money smartly will enhance savings. If you have any debts, they should plan to pay off the high risk elements or interest debts like credit cards etc initially. Through reduced interest paying, more savings can be made possible.
How to find Money to Save?
There are many ways to find money to be saved. People can uncover some of the new sources for saving money. In most cases, coins are accumulated to pool into a big amount. It is possible to utilize this amount as a possible savings account. Make it a habit to cut off the varied extra expenses so that the same amount can be saved wisely. By availing discounts and other coupons for smaller purchases, additional money can be saved. People while dealing with every single expense should ask a personal question to themselves that whether it is possible to manage without this expense? Try to switch to cheaper version of the same product or service expense.
If people get tax refunds or income tax credits earned, the same amount can be operated as reserves. If having any bank savings deposit, the interest earned can be saved by transferring the same funds towards separate account.
How to incorporate “paying yourself first” strategy?
Often referred as the golden rules of personal finance – “paying yourself first” means putting the required contribution in to your savings account first before spending the income on any thing else. The personal finance strategy of “paying yourself first” helps in mentally ascertaining savings as a top priority. People focus more on their future by following this pay first initiative. This also helps in enhancing a sound financial habit as well.
People often prioritize their income mainly on paying bills, loans and other expenses. The left over amount is usually put aside as savings. One of the most regular and easiest techniques of developing a saving habit is to incorporate regular automatic transfer of funds on first pay day itself towards the bank saving account. In this way, people can systematically save money before it is spend towards any other expenses. An important decision to pay you first will eradicate the enticement to skip monthly contributions and thus keep the financial goals on track.
Different types of Savings Account
There are different specific options for opening this type of accounts. The decision on opting for the best type of accounts will usually depend on the total individual income, amount to be saved, use of saved amount, period of saving etc. A basic or regular bank savings account will be useful for those customers who intend to put a specified amount of money regularly in their accounts. This type of accounts fetch customers annual bonus along with the interest amount. Cash ISAS (Cash Individual Savings Accounts) provides better return on the investment made. A nominal percentage of interests is only charged with this type of account. But, the most important point is tax free benefits offered to the customers. There are specified limits on how much deposits can be made each particular year. Certificate of Deposit (CD) accounts necessitates the customers to deposit the saved amount for a specified time frame. The time period will differ as per the bank or financial institution, type and amount of CD etc. In any case, if the money is withdrawn before the maturity period; customers need to pay a penalty. Money market account helps in attaining high interest rate. The interest rate is subject to fluctuate as the economy witness new changes. Customers need to keep a higher minimum balance for this type of savings account.
How much income one earns will not make any difference if the same is not saved wisely. There are no easy recommendations to make on savings unless it is followed as an emotional priority habit.