Developing good savings account habits may be the key to reaching your financial goals. Saving money could be easier than you think if you follow some simple steps. Read on to find out how you can use a savings account to effectively reach your goals.
How to develop good savings account habits
The best way to create a habit is consistency. This goes for financial habits too. The trick to help develop good savings account habits is to save regularly. You can do this by:
- Creating a budget for your regular income and expenses.
- Making sure that you set aside money for saving each time you get paid. You can do this by cutting back or eliminating your non-essential expenses.
- Arranging for some of your pay to be deposited directly into a special savings account that you don’t touch.
If you don’t follow the simple steps above, but you follow a strategy of saving money that’s left over instead, one of two things is likely to happen:
1) You’ll often find that you have no money left over to save.
2) You won’t save as much.
How to set savings account goals
Setting goals is the first step in achieving them. You should try and set SMART financial goals. SMART is an acronym for five characteristics.
- Specific – Your financial goals should be specific, not vague. For example, a specific amount that you want to save, such as $10,000 or a 20% home deposit.
- Measurable – Your financial goals should be measurable. It’s easy to measure progress by monitoring your savings account balance.
- Achievable – Your financial goals should be achievable. In other words, they should be realistic. Set a challenging goal by all means, but it should be realistic enough that you are capable of achieving it.
- Relevant – Your financial goals should be relevant. In other words, they should enable you to live the life you want to live, buy the things you want to buy, or have the experiences you want.
- Time-Bound – Your financial goals should be time-bound. In other words, you should set a deadline for their achievement. For example, save $10,000 by 31 March 2023.
Can savings accounts help you to reach your goals faster?
Yes, thanks to the magic of compound interest. If you have a dedicated savings account and you don’t make withdrawals, you will earn interest on top of the interest you’ve earned, as well as on the amount you save.
It’s also important to look for a savings account with the highest interest rate to help you achieve your financial goals faster. Some savings accounts will pay higher interest rates if you don’t make withdrawals for certain periods or you stay on track to reaching your goal by making the appropriate deposit amounts.
The higher amount of interest available is one of the standout reasons that savings accounts are more helpful in reaching goals than an everyday account. The other reason is your money is held in a different account, so you’ll be less tempted to spend it on everyday transactions.
Can you have joint savings accounts?
Yes, and this can be another strategy to help you to achieve your financial goals faster. It’s important that you and your savings partner have the same goals and motivations for achieving them, and that you both develop good savings habits.
Whether you’re trying to save a home deposit, buy a car or save up for a holiday, savings accounts are a great way to help you to achieve your financial goals. Compare New Zealand savings accounts to find the perfect one to reach your goal.