Learn how to manage your money, as well as which type of savings account to use when saving this money.
2. Overview
It used to be that saving money consisted of shoving folded bills and clanking change into a ceramic, pink pig, which was only to be smashed open when the money was needed the most. However, long gone are the days of saving money in a piggy bank. Before savings accounts, government regulations, and types of accounts are explained, let’s look at why it’s important to save.
There are two types of goals: short and long term. These goals can be applied to anything, including saving money. An example of a short term saving goal is saving to buy a new DVD player. An example of a long term saving goal is saving to be able to move into a new home. Let’s start with short-term goals.
These are relatively easy. Figure out how much the desired item costs and save a portion of your income until you meet this requirement. Say what you want is more expensive it might take longer. However, as the name implies, a short-term savings goal is usually just that- short.
3. Long-term goals
Long-term goals are a bit trickier. If you take the example of moving into a new home, you must first see if you can meet the down payment requirements. If you can, you then need to have a portion of your money go towards maintaining your ownership of that home, future payments, and any other aspects that you might need. However, there are a few things you need to do before saving for either short or long term goals.
1. First off get rid of your debt. Depending on the extent on this debt, this might take a considerable, or non-substantial, amount of time.
2. Budget your savings. By figuring out how much you can save each week, each month, each paycheck, etc, you’ll be able to see when you’ll be able to meet your goal, which leads to the next step…
3. Set a deadline. This goes hand in hand with budgeting your savings. If you tell yourself you have a given amount of time to save the money by, you’re more likely to stick to it. However, make sure you have money saved for emergencies. These types of setbacks, unfortunately, do happen.
4. Keep track of your expenses, which go hand in hand with reevaluating your expenses. Do you buy unnecessary things? Can you save money by bring a lunch to work? Not buying that cup of coffee? Taking public transportation? All of these assessments can help you track where your money goes when it leaves your pocket, which leads to figuring out how you can save more money.
4. Where to save
Now that proper savings techniques have been established, it’s time to decide where your money should be saved. While piggy banks are cute, they aren’t the best means of storage when it comes to saving your money. With one sweep of a hammer, piggy can be crushed and your money can be spent. Savings accounts are the best places for your saving endeavors.
Savings accounts not only are a convenient way to save money, but also are a way to accumulate assets. In the United States, savings accounts are maintained by financial institutes and generate interest. Although they are not as convenient as direct accounts, such as checking accounts, savings accounts can be used for a variety of reasons.
Generally, in the United States, a depository at a financial institution can instate savings accounts. The types of financial institutions are commercial banks, savings and loans associations, credit unions, mutual savings banks, and building societies. A savings accounted can be established as long as the guidelines are met under Section 204.2(d). In this section, the federal government mandates that depository institutions must have a number of securities, such as, but not limited to, authority, purpose, scope, computation, maintenance, emergency reserve, transitional adjustments and mergers, supplemental reserve, international banking facilities, banker’s banks, etc.
Because the purpose of a savings account is to do just that, they are often regulated more strictly than other accounts, such as checking accounts. With savings account, a depositor may have a limited amount of deposits, payments, and transfers each month. Additionally, the United States government under US, Regulation D, 12 CFR 204.2, mandates these regulations. In accordance to this law, banks are permitted to allow their savings account members to have six transfers or withdrawals in a one month, four week, span of time. Three of the six withdrawals can be made via ATM, credit card, or debit card, or be made to a third party, such as writing a check. While most banks do not limit the number of deposits, some may, depending on the bank’s assets. However, while these sanctions are government enforced, many banks do not have to strictly enforce these regulations.
