APYs aren’t what they used to be — but they’re headed up.
The recent recession drove interest rates for savings accounts down and made it harder for many Americans to save. But the economy is starting to bounce back and interest rates are on the rise, which means it’s a good time to start tucking away a financial safety net.
Work out a savings plan
Take some time to think about your savings goals. Do you have any particular purchases in mind, or do you simply want to build your balance as much as possible? Once you’ve set yourself a financial goal, you can work out a savings plan to help you get there as soon as possible.
An effective savings plan will outline how much you plan to save, the timeframe in which you’ll make it happen and how much money you need to deposit into your savings account each week.
Make regular deposits
The best way to maximize your savings is to set aside money on a regular basis. Setting up a direct debit so that a portion of your salary goes straight into your savings account as soon as you’re paid can help make sure that your balance grows every week. This tends to be especially helpful for people who are tempted to spend their money.
And if you get any windfalls, such as a tax refund or a bonus from your employer, make sure to deposit this into your savings account as well. The more money in your account, the more interest you’ll earn.
An important part of any savings plan is working out where you can cut back on expenses. From gym memberships to eating out, there are plenty of ways you can reduce your spending and have more money left over to put towards your savings.
One of the biggest barriers to saving is the temptation to dip into your balance at any given time. If you’re the type of person who always dips into your savings, you may want to consider taking steps to make it harder to do so. For example, you could open a savings account with a different bank or you could invest your money in a CD.
Consider a CD
Certificates of deposit, or CDs, lock your money away for a set amount of time. When the term is up, you can withdraw your money or roll it over into a new CD.
They tend to have higher interest rates than traditional savings accounts, which can help some people save faster. But if you withdraw your money before the term is up, you’ll face a penalty fee.
Compare your options
If you want your money to work harder for you, it’s essential that you choose the best account for the job. So instead of just signing up for the first savings account you come across, compare a range of accounts and shop around for the best interest rate and an account that charges minimal or zero fees.
If you have multiple savings goals, you may even want to consider opening a couple of accounts. For example, you can open a short-term savings account linked to your checking account for major purchases or upcoming vacations and a long-term savings account at a different institution with better interest rates. That can help keep you from emptying out your savings every time you have a big purchase — or feeling guilty when you need to spend.
Interest rates may be low, but they’re steadily rising. Which means that now is a good time to start saving. Compare savings accounts to find one that’s the right fit for you.