Everyone should have a savings account. But make sure you only use it for the goals you have and not when you're strapped for cash. Here's how to make your savings account untouchable.
When I first started saving, my savings account was linked to my primary checking account so that I could transfer funds back to savings—or even withdraw them at an ATM—just as easily as I put the money in.
Therefore, if I ever found myself short on cash, I would be tempted to tap savings rather than find ways to cut costs until payday.
I recommend keeping your savings in a totally separate online account. Not only will you reduce the ease of which you can access your money (thought it will still be just two-to-three business days), you’ll also likely earn a higher rate than you could at your local bank and be able to consider a savings account promotion.
You can find a couple options below, based on where you live:
Cut up your savings debit card
Many savings banks bill a free debit card linked to your account as a perk. However, with a savings account, it’s not really a plus.
Cut up any debit card you get that is linked exclusively to your savings bank. Or—if you really must hang onto that ability to access some cash from savings—keep your debit card in a safe place at home, not in your wallet.
Set it and forget it
The best way to avoid tapping your savings too often is to forget the money even exists. Especially if you can have your savings contribution directly deposited or automatically transferred to your account, you can pretend the account doesn’t even exist.
If you find yourself tapping savings often, reduce your contributions
Let’s face it, if you deposit $300 to savings each month only to take $100 out almost every month, your budget isn’t working.
I would say it’s better to put $200 into savings that you know you won’t touch than to put $300 in and constantly be so strapped that you routinely pillage your piggy bank to make ends meet.
Use a credit card instead
What? Why would I recommend paying with credit over cash? The fact is, I usually wouldn’t.But I only recommend you use a credit card in this case if you need to bridge the gap between an unexpected expense and your next paycheck.
That is, when you can and will pay the balance in full within a month. I would say it’s better to do this than to tap your savings for the expense, just because of the precedent using your savings can set.
Obviously if the expense is major, like a whopper of a car repair, you may need to use some savings.That’sbetter than putting the charge on your credit card and paying it offer over several months with a high interest rate.
Summary
Everyone should have a savings account. But you should only use it for the goals you have and not when you’re strapped for cash.
Have you ever found yourself tapping savings too often? How have you stopped? Let us know in the comments.
Once your CD matures, you'll have access to the amount you deposited as well as the interest you've earned. One big difference between a CD and a traditional savings account is that you cannot touch the money in a CD during the term. “You might put $10,000 into a two-year CD with a 2.5% APY.
A term deposit is a type of savings account where you lock the money into the account for a certain time and interest rate. It's possible to earn higher interest if you lock the money away for longer, and it's a little harder to access your money and spend it.
Using a restricted account wisely can be a powerful strategy in making your savings truly untouchable for everyday expenses while securing your financial future.
With a term deposit, your savings are locked away until the term ends. There are usually penalties if you take your money out early, which can stop impulse spending in its tracks. To help your savings grow even more, tell the bank to roll your term deposit over when the term ends.
Like a savings account, a certificate of deposit (CD) is often a safe place to keep your money. One big difference between a savings account and a CD is that a CD typically locks up your money for a set term. If you withdraw the cash early, you'll be charged a penalty.
Your options include a term deposit or a savings account with withdrawal restrictions. Here's the difference: Savings account with withdrawal restrictions. Also called a bonus saver account, these offer extra interest each month you save money and make no withdrawals.
Customers can request to lock up funds in an existing account through digibot, which can be accessed via the bank's digiVault page or digibank online. After launching digibot, customers will need to enter 'Lock My Savings', after which, they will be prompted to authenticate the request.
CDs. A certificate of deposit, or CD, is another type of savings account. CDs typically pay a higher yield than traditional savings accounts because you agree to let the bank keep your money locked up for a specific term that could range from three months to five years or longer.
By the time you're 25, you probably have accrued at least a few years in the workforce, so you may be starting to think seriously about saving money. But saving might still be a challenge if you're earning an entry-level salary or you have significant student loan debt. By age 25, you should have saved about $20,000.
Depositing $20,000 in a savings account is wise when you have a plan for the money, such as a near-term expense or rainy day fund. For long-term goals, like retirement, you might be better served by opening a brokerage account or certificate of deposit (CD).
The median saver has closer to $5,000 in the bank. So if you have $25,000 saved, you're on the good side of the middle by a comfortable margin. That's a lot of cash to leverage — but also a lot to protect. Here's how to utilize, preserve and grow the impressive financial cushion you've built.
They're a type of savings account that 'locks in' your cash, meaning you won't be able to access your money during the agreed term. In return, you'll usually earn a higher interest rate. A common form of locked savings accounts are fixed rate bonds.
A certificate of deposit, or CD, typically earns you interest at a higher rate than either a savings or checking account. The catch is that a CD has a specified term length. You cannot touch your money during that term.
How Do You Freeze a Bank Account? You can freeze your bank account to prevent any debit transactions from clearing by logging into your online banking platform or mobile banking app (assuming your bank offers the option). Or you can contact customer service and request an account freeze.
Certificates of deposit. With a certificate of deposit (CD) your money is stuck for a set time of your choosing — usually anywhere from one month to five years — while it earns a fixed interest rate. It's more restricting than a traditional savings account because you can't access your money until the term is finished.
They're a type of savings account that 'locks in' your cash, meaning you won't be able to access your money during the agreed term. In return, you'll usually earn a higher interest rate. A common form of locked savings accounts are fixed rate bonds.
You can take money out of a savings account if you need it to cover an expense. Some financial institutions only permit six free withdrawals per month. If you make frequent withdrawals from a savings account, it may affect how much interest you'll earn.
Regularly move the money you save out of your checking account into your savings account, where you'll be less likely to touch it before you reach your goals.
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