Leveraging Your Savings Account to Reach Your Financial Goals
November 22, 2023
A savings account is more than just a separate account from your checking account. A savings account is the first step in creating security, and reaching your financial goals.
In the journey toward financial stability and success, one indispensable tool stands out - the savings account. As your financial partner, Education First Federal Credit Union is here to guide you on how to select the right savings account for your unique financial needs and then how to utilize that account to reach your specific goals.
The Foundation of Financial Success: A Savings Account
A savings account is not just a place to stash your extra funds; it is the cornerstone of a secure and prosperous financial future. Whether you're saving for a dream vacation, an emergency fund, or planning for retirement, a savings account provides a safe and accessible haven for your hard-earned money.
Building Emergency Funds: Shielding Your Finances
Life is unpredictable, and unexpected expenses can arise at any moment. A savings account acts as a financial safety net, providing you with the peace of mind that comes from knowing you're prepared for the unexpected. The gold standard of an emergency savings account is that it should be enough to cover three to six months of living expenses. If your emergency fund isn’t quite there, More than half of Americans don’t have an emergency fund, and 40% of those who do have less than $10,000, according to a recent CNBC/Momentive survey.
Achieving Short-Term Goals: Turning Dreams into Reality
Whether a down payment on a house, a new car, or a long-awaited vacation, a savings account allows you to earmark funds specifically for short-term goals. Setting up separate savings accounts for different objectives can help you stay organized and focused on reaching those milestones. One resource can be a club savings account to help you save for specific goals like a vacation or Christmas so those expenses don’t eat into your normal monthly budget.
Preparing for the Future: Retirement Planning
As you navigate through the various stages of life, retirement might seem like a distant reality; however, the earlier you start planning for it, the better off you'll be. When used in conjunction with other retirement planning tools like 401Ks, IRAs , or pensions, a savings account can contribute significantly to building a nest egg that ensures a comfortable and stress-free retirement. If your retirement planning is already robust, your savings account can still help cushion your retirement, especially if you intend to travel, move, or pay for a wedding or anything else that may come up. Our free online retirement savings calculator can help you determine how much you’ll need on hand to supplement these other income sources.
Tips for Choosing the Right Savings Account
Not all savings accounts are created equal. Selecting the one that aligns with your financial goals and lifestyle is crucial for maximizing its benefits. Here are some key factors to consider when choosing a savings account:
1. Interest Rates: The Engine of Growth
One of the most significant advantages of a savings account is the interest it accrues on your balance. When choosing an account, compare interest rates across different financial institutions. You’ll find that credit unions typically offer more competitive rates on deposits to help your money grow steadily over time.
2. Fees and Charges: Avoiding Unnecessary Costs
Hidden fees can eat into your savings and impede your financial progress. Look for an account with minimal fees, especially for maintenance, withdrawals, and transfers. At Education First Federal Credit Union, we are committed to transparency, and our savings accounts are designed to help you save your money, not spend it.
3. Accessibility: Balancing Convenience and Control
Choose an account that provides the right balance of accessibility and control. While it's essential to have easy access to your funds, it's equally crucial to have features that discourage impulsive spending. And speaking of convenience, beginning January 2024, Education First FCU will roll out Savings Jar software to members, allowing purchases to be “rounded up” and those funds to be directed to a designated savings account. What could be easier than growing your savings account with everyday purchases?
4. Minimum Balance Requirements: Tailoring to Your Needs
Some savings accounts may require a minimum balance to avoid fees or qualify to earn interest. When selecting a savings account be sure to evaluate your financial situation and select one that aligns with your ability to maintain the required balance, or else look for an account that doesn’t require one.
5. Additional Features: Enhancing Your Financial Arsenal
Look for savings accounts that offer additional features, such as overdraft protection, automatic transfers, and mobile banking apps. These tools can streamline your savings strategy and make it easier to stay on track. Education First Federal Credit Union provides a suite of digital services, including a personal goal and budgeting software (iThrive) and informative content like our blog (the Vault), ensuring you have the tools you need to manage your savings efficiently.
Strategies for Maximizing Your Savings
Now that you know what features to look for in a savings account, let’s look at some strategies you can apply to your savings accounts to help you reach your financial goals faster.
1. Automate Your Savings: Set it and Forget it
Take advantage of automation features offered by your financial institution. Schedule automatic transfers from your paycheck or checking account to your savings account each month - also known as “paying yourself first.” This ensures consistent contributions to your savings without the need for manual intervention. You also have the ability, through our online banking platform, to link to external accounts, which for some may also help eliminate the temptation to spend. Once you open your savings account you can allocate a specific amount to direct deposit from your paycheck into your savings account. Not sure how much to allocate? No need to guess. Education First offers a variety of free savings calculators to take the guessing work out of determining those numbers.
2. Review and Adjust: Adapt to Changing Circumstances
Life is dynamic, and your financial situation may change. Regularly review your savings goals and adjust your contributions accordingly. This flexibility ensures that your savings plan aligns with your evolving needs and aspirations.
3. Stay Disciplined: Resist the Urge to Dip into Savings
The purpose of a savings account is to provide financial security and help you achieve your goals. Resist the temptation to dip into your savings for non-essential expenses. Staying disciplined ensures that your savings continue to grow, paving the way for a brighter financial future. Education First Federal Credit Union online and mobile banking allows you to limit what accounts are viewed within the platform, thus reducing the temptation to spend your hard-earned savings.
4. Celebrate Milestones: Stay Motivated
Reaching financial milestones, no matter how small, is cause for celebration. Acknowledge your achievements along the way to stay motivated. This positive reinforcement can help you stay committed to your savings plan. If you are passionate about expanding your financial literacy, subscribe to our blog or check out Zogo, an online financial literacy app that allows you to earn gift cards while furthering your knowledge of personal finance.
5. Pass it on: Set the Children in Your Life on the Right Track
Having the tools to achieve your financial savings goals isn’t enough; it's important to pass the knowledge on. If you have any children in your life, consider helping them start good financial habits now to prepare them for the future. We're all about empowering our youth at Education First. That's why we have a great savings program to get kids ages 6-12 started on the right path to a future with solid financial footing. Our youth savings program offers many tools to sharpen their financial skills. From online games to workbooks and monthly savings incentives, this savings account is all about setting kids up for financial success.
As a community credit union, Education First Federal Credit Union is dedicated to empowering you on your savings journey. A well-chosen savings account is a powerful tool that can pave the way for a secure and prosperous future. By following these tips and strategies, you can make the most of your savings and turn your financial goals into reality. Remember, your financial success is our success, and we are here to support you every step of the way.