Save Better in 2020
Make 2020 the year of saving!
What are you saving for?
- A vacation?
- A house?
- A car?
As we discussed last week, 78% of us live paycheck-to-paycheck and 26% of us have fewer than $1,000 saved, which means many of us aren’t saving at all (at least not regularly) and most of us have more in debt than we have savings.1
So why not make this the year you change that statistic and make saving a priority for 2020?
The first step is to create a budget to help you keep track of what you are spending and where you can cut back. Once you have that in place, you need to decide how to save money.
There are lots of tools out there to help!
You can set up automatic transfers that will move money from your checking account to a savings each account each month so you don’t have to remember to do it. You can do this within Online Banking or visit your nearest branch and ask them to set it up for you.
You can also use fun tools like QuickSaver – which rounds up each debit card purchase you make to the nearest whole dollar and transfers the difference into your savings account.2
Regardless of how you choose to do it, you will need an account to put your savings into. But which account type is best? There are so many options!
Let's break down the basics:
Savings accounts are deposit accounts that pay interest (generally higher than a checking account) but limit the amount of times you can take money out to 6 times per month. Basically, in exchange for leaving your money at the bank over a longer period of time, the bank pays you a higher interest rate. In addition, the more money you put into the account, the higher the interest rate tends to be. Savings accounts are great for saving money toward short-term goals, like for a vacation or holiday fund, because you can earn interest while you save, but you can use the money when you are ready to make your purchase.
A Certificate of Deposit (CD) is a way to save money over a predetermined amount of time. The term could be in days, weeks, months or even years, and you maintain the same rate the whole time. CDs generally offer higher interest rates than savings accounts but, you guessed it, your ability to access the money is even more restricted –If you withdraw your money before the term of the CD is up, you will be charged a penalty. Certificates of Deposit are great for long-term savings projects like someone who wants to live off interest payments without the risks of investing.
Money Market accounts are like Savings Accounts, but they typically offer higher interest rates, but you generally need to keep more money in the account to earn the higher interest rate. Money Market accounts are great for short-term, large savings goals that you don’t want tied up in a CD.
Retirement is by far the most popular type of savings. An Individualized Retirement Account (IRA) is one type of tax-advantaged retirement savings account. Like all the others, saving with an IRA has restrictions. If you take money out before you turn 59½, you will pay penalties. There are also limitations on how much you can put into an IRA each year which changes each year.
However you decide to do it, make saving money a priority and come up with a plan to make it happen. As always, we are here to help!
Swing by any of our locations, give us a call at 805 965 5942 or email us at [email protected]. And, if all this talk about interest rates confuses you, check back in next week as we take an up-close look at interest!
1 Kagan, Julia. “Individual Retirement Account (IRA).” Investopedia, Investopedia, 18 Dec. 2019, www.investopedia.com/terms/i/ira.asp.
2 The change will be combined and a single transfer will be made at the end of each business day your card is used. There is no charge for the QuickSaver feature. See your Account Agreement and Disclosures for terms and conditions for deposit accounts. Upon enrollment, we will round up your MasterCard® debit card purchases to the nearest dollar and transfer the difference from your checking account to your American Riviera Savings or Money Market account. If the account enrolled in QuickSaver is converted to a checking account, QuickSaver transfers will continue to be made into that account. If you do not currently have a Savings or Money Market account, we will contact you to open one. We may cancel or modify the QuickSaver service at any time without prior notice.Next: The Interesting World of Interest