5 Tips to Achieving Your Savings Goals
By John Rosenfeld, Executive Vice President and Head of Everyday Banking, Citizens Bank
Imagine foregoing that $4.65 special coffee everyday on your way to work. Did you know you would save $1,209.00 each year? Over time, you would have built a healthy savings account that could go beyond an activity for a rainy day. Instead, it could translate to the down payment on a home or college tuition or even a family vacation abroad.
Since 2012, the overall savings rate for American consumers has dropped by half. According to the U.S. Bureau of Economic Analysis, the amount Americans saved of their pre-tax income hit an all-time high at 10.5 percent in December 2012. As of March 2015, that rate is now only at 5.3 percent. So why are people saving less? Often times, it’s because consumers believe they can’t afford to save. This is one of the top money misconceptions Citizens Bank often hears from our customers.
Starting a savings account can sometimes make consumers feel like they are losing money, but it’s really a matter of redirecting your income. Establishing automatic savings habits can help ease the pain. Setting up an automatic deposit from your paycheck into your new savings account each month for a set amount – even $25 a month – will add up over time. Beyond saving to purchase a home, pay for college or a vacation abroad, it is also important to save to build up an emergency savings fund for any potential unforeseeable circumstances.
The following tips can help consumers debunk the myth that it’s “too expensive to save” and achieve their money goals:
- Identify the best savings account for your current financial situation. The market is flooded with different types of account. Shop around for the best account for your time in life – the savings needs of a student are different from those of a retiree.
- Aim to move a small amount of money every month from your checking account to a savings account. Apart from the fact that this will give you a bit of a cushion and some peace of mind that you have an emergency fund, you can also choose an account that is designed to help grow your savings.
- Break down your savings into three areas: short-term, medium-term and long-term. Short-term should cover day-to-day needs. Medium-term can help with things like a deposit for a new car or house. Long-term should focus on retirement planning.
- Build up an emergency savings fund. Emergency savings should cover three to six months of income, so check in to see how much you are allocating for unforeseeable circumstances. Decide how much more you need to put away over the next six months to meet your emergency savings goal.
- Recognize not all savings are risk-fee. While money you put in the bank should be safe, the same might not be true for money invested in the stock market. Bear in mind that the value of such investments can fall as well as rise, and that you may not get back the full amount of your investment. You should think carefully about how much risk you are prepared to take with your money, and only invest in risky areas if you are prepared for a potential loss, especially in the short-term.
By implementing these strategies and shifting perceptions, consumers can start achieving optimal savings. It doesn’t have to be difficult – or expensive – as long as you have the right mindset and realistic goals.