Why Everyone Needs A Savings Account

2007-03-08 10:33:40

( Financial )



We do not wish such ill fate on you, but sometimes dire circumstances cannot be helped. This is when we need our emergency fund. Most of us will be much more motivated to save up for a vacation, or for those designer shoes you have been looking at every day for the past month.

It is fun to look forward to these things. But you also have to understand that building a substantial savings account is a necessity for our financial health. Some experts recommend putting aside at least three months worth of your salary as your emergency fund.

If you think it is virtually impossible to save with your current living expenses, you may be overlooking some things that may be able to help you. Even little things count once diverted to your savings account.

First, take note of your spending habits. Track your spending then determine which aspects you can cut out. Then treat your savings account like a bill that you have to pay every month. Determine a set percentage or a set amount.

Second, start small. Even the fancy coffee you drink everyday on your way to work or the take out pizza you have for dinner every Saturday counts for a lot when you compute the amount you have spent for the year on coffee and pizza alone.

If you get a raise, divert that excess money or even half of it to your savings account. You have already budgeted your living expenses based on your current salary. You do not need to spend the extra cash.

If you have a car or personal loan and you have already paid it off, continue paying a fraction of the original monthly amortization to your high interest rate savings account. Automatically transfer or divert these funds so you will not see them in your checking account.

Last, turn a blind eye to advertisements both on television, on billboards and on magazines. The latest sale or the latest fashions would tempt you to spend.


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