5 Tips to Help You Commit to Better Savings - Genisys® Credit Union

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5 Tips to Help You Commit to Better Savings

on 1/10/2018

woman adding money to piggy bankHow did you kick off the New Year? Did you dance until your shoes wore through? Did you get out leftover 4th of July fireworks and blast them into the midnight sky?

The New Year is a great time for fun. It’s also a good time for more serious endeavors, like making resolutions to eat better, exercise more, or develop new skills.

A common New Year resolution is to build a larger savings balance. This can be easier said than done. If you’re serious about savings, implement these tactics.

1. Set a savings goal.

Without a defined goal, you may find it difficult to make meaningful progress with saving. Start with an aim to accumulate three to six months of your income to build an emergency fund for unexpected expenses.

Once you’ve established your emergency fund, identify your next goal. Perhaps it’s saving for a down payment on a home or car. You may be looking to save for your child’s education. Whatever goal you establish, know how much you need to accumulate to reach that goal.


2. Budget for savings.

Once you have defined your goal, now set an amount that you will budget to save out of each pay period. The amount you allocate will depend on how much you need to accumulate, the time frame for reaching that goal, and your other expenses.

If you’re trying to accumulate enough for a good emergency fund, try to reach that goal in one to two years. If your monthly take-home pay is $2,500 and you’re trying to accumulate three months of income, you will need to save about $312.50 each month to reach a $7,500 balance in two years. That may seem daunting, but take a close look at your expenses to see where you can cut back to save more.

Even if you can’t save that much, set an initial amount you can afford and stick to it. When you get an increase in pay, try to devote most or all of that increase to savings. It’s better to make progress at a slower rate than no progress at all.


3. Separate savings from deferred spending.

Take a look at your current savings account balance. Ask yourself this: What portion of these funds are really savings for a long-term goal or an emergency? And how much is simply waiting to pay a future known expense? If you mix your true savings with a parking spot for future known expenses, it can be difficult to tell if you are progressing toward your goal.

​Keep separate savings accounts for different needs. If you have to pay something like property taxes twice a year, keep that money in a savings account rather than checking to avoid dipping into them for other expenses. But these funds are actually “deferred spending.” You know you have to pay, so you can’t really count this money as savings.

​Separate your savings goal funds to another account. You won’t get fooled into feeling you’re progressing toward your savings objective only to feel depleted when you have to withdraw for regular expenses.


4. Reevaluate your savings accounts.

Many people only have a basic savings account. If you’re a serious saver, you will want to consider these other options.

Money market accounts.
money market account will pay a higher interest or dividend rate than the standard savings account. You will need a higher minimum balance of $1,000 or $2,500 in most cases.

​Once you have accumulated enough to open a money market account, it makes sense to earn a little more by shifting funds to a money market account.

​Here’s a word of caution: Make sure you find out if any fees apply if your balance falls below the minimum. If there are such fees, you may want to reconsider opening this account because you still may need the funds in the future or look for another place to open the account.

Savings Certificates.
Once a staple of savings portfolios,
the savings certificate has lost some luster over the past few years with interest rates remaining historically low. However, there are still many benefits to using this vehicle as part of a meaningful savings plan.

The first benefit is the interest rate. Despite the current low rate environment, many financial institutions still pay certificate rates that are exponentially better than a savings account interest rate. Why earn just .10% on savings when you could get ten times that much with a certificate?

The rate you earn will depend on the length of time you commit to keeping funds in the account, generally from three months to five years. Select a term that aligns with your goal and your ability to invest your funds for that length of time. Certificates also require a minimum balance, often $500 or $1,000. You make a lump sum deposit, and those funds stay in the account until the end of the term.

Withdrawals from a savings certificate are restricted. You can get at the money if necessary, but you will pay a pretty hefty penalty for that withdrawal. The restriction can be a useful feature if you are tempted to dip into your savings at times. The certificate will help you stay committed to keeping those funds in savings.

Hybrid account.
Some financial institutions offer hybrid products that combine the advantages of the different types of savings accounts. For example, Genisys Credit Union offers the Flex Certificate.

​This account lets you continue to make additional deposits while earning the certificate rate for one year. You also have a one-time option to withdraw up to 25% of the balance during the one-year term without incurring a penalty. The Flex Certificate can be a great option for the beginning saver.

5. Just do it.

Saving money takes discipline but in the long run, you will find it well worth the effort. Take some time today to develop your plan and open the right accounts. You will reap the rewards tomorrow.

Genisys offers a variety of savings options at highly competitive rates. Check them out here.


© Genisys Credit Union and www.genisyscu.org, 2018.  Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to Genisys Credit Union and www.genisyscu.org with appropriate and specific direction to the original content.

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