When it comes to saving money, not all strategies are created equal.
David Sant, Chief Marketing Officer for Cyprus Credit Union, joined us with three ineffective ways of saving money.
Keeping all Savings in One Place
If you have your emergency, vacation, down payment, etc. in one account, you may lose track of what you have saved for each. Separate your savings account into subcategories or even at different financial institutions.
Not Diversifying your Accounts
Not all savings accounts are equal. Often you can earn higher interest rates if you have higher balances or are willing to commit to keeping your balances for a longer time frame. A basic savings account is great for savings that you might need quick access to, like an emergency account, but once that balance gets above $10,000 you might want to start looking at a Money Market savings account. This works similar to a traditional savings but pays a higher dividend based on higher balances.
Another option are certificate accounts, or CD's, these savings accounts will pay the highest dividends, but you need to be willing to lock in your money for an agreed time frame, usually 6-60 months. But be aware, there are penalties for early withdrawals so make sure you are okay not having access to these funds for the agreed time frame.
Keeping Checking High
While you want enough funds to avoid overdraw, having too much may lead you to make unnecessary purchases. Keep a minimal amount in checking and move everything into an account that's harder to access.
If you have trouble with saving, set up automatic deposits to your account every paycheck.
You can learn more financial tips at cypruscu.com.