Kickstart Financial Wellness with Evergreen Credit Union
Author: Evergreen Credit Union
Published: Friday, 01 Sep 2023
Image caption: To learn more visit: https://www.egcu.org/
Saving money is crucial for building financial security and achieving long-term goals.
Start out small and set a short-term savings goal. Maybe you’re putting money away for a trip, a new toy, or a down payment. You could even automate your savings by setting up a small recurring transfer to a dedicated account. As time progresses or your earnings develop, you increase the recurring transfer amount.
Pay Yourself First
Put a set amount of money into savings, retirement, or investments before paying for other expenses or spending. If your living costs make it tough to do this, try setting a few dollars aside each time you get paid.
The 10% Savings Rule
The sooner you start saving, the greater impact you’ll make with compound interest1. Understanding compound interest2 will help. For example, assume your income is $3,000 per month. According to the 10% rule, you’d aim to save $300 (or 10% of your income) every month. If you start following this savings rule at age 25 and place your savings in an account earning 5% interest, by age 65 you will have contributed $144,000. The account also could have earned $313,806.05 in interest for a total of $457,806.05. Starting savings later means you have less time to earn interest.
FACT: If you start saving at age 30 rather than 25, you’ll have skipped $18,000 in savings contributions, but miss nearly $100,000 in earned interest by age 65.
Types of Savings Accounts
To find the best savings account for you, think about the way you bank and the features you value most. Important things to keep in mind include interest rates, fees3, minimum balance4, deposit requirements5, and accessibility. Choose your accounts so you can add or pull from your savings when you need to, earn appropriate interest, and prepare for your future! View some common credit union savings account options, below.
Share Savings – Share Savings accounts are perfect for everyday savings. These accounts are simple and have very few requirements or fees. Keep cash in these accounts that you want to have available for quick use.
Money Markets – Money Market accounts are like Share Savings accounts but offer higher rates. These accounts are still very accessible, but the rates can change over time. Perhaps keep another layer of savings in a Money Market account.
Share Certificates - If you want to save for the long term, consider a Share Certificate (CD). CDs offer higher interest rates than other savings accounts with a few more accessibility requirements.
- Get paid a fixed rate for a set term
- Fixed rates higher than other accounts
- A wide range of terms available
- No setup or maintenance fees
- Early withdrawals subject to penalty
- Minimum deposits to open
Emergency Fund: We suggest you have an additional account specifically for unexpected expenses. People of all ages should set aside savings to cover emergencies. Aim for $500!
- Interest – This is like a reward for saving. Financial institutions will pay extra money to you on top of your savings because you’re allowing them to use your cash for lending!
- Compound Interest – This is the interest you earn each year calculated on your initial investments and the accumulated interest from previous years. Your balance doesn't merely grow - it grows at an increasing rate.
- Fee - Some financial institutions charge money to open a savings account or keep it open. Shop around for a low-fee savings account that offers similar rates of interest.
- Minimum Balance - This is the minimum amount you must keep in your account for it to remain open or without fee.
- Select an account that allows you to deposit and withdraw money as needed.
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