Big Impact Savings Strategies and Advice
Posted by : Raj | Posted on : Tuesday, January 12, 2010
When you are saving for a goal or to build up a financial buffer in the bank, it is not enough to simply open a high interest savings account and expect your savings to grow exponentially. Instead you need to develop and stick to certain savings strategies which will keep you on track and help you reach your goal, but before you think that this is all getting too complicated, the right savings strategies are easy to put in place, and even easier to stick to when you follow this advice.
Strategies for Long Term Saving
Everyone’s savings goal is different, but a long term savings goal is also very different to a short term goal . In the short term you don’t have to worry about losing focus, you don’t have to combat inflation and you don’t have to worry about the security of your savings account investment because you’ll probably remain covered by the government’s deposit scheme. However, when planning a long term savings goal, you need to keep these strategies in mind:
- · Look for a high ongoing interest rate as promotional rates are only competitive for a short time. Savings account providers will offer promotional or introductory interest rates on their savings accounts, but with a long term savings goal you are more likely to benefit from a higher ongoing rate, because after the promotion ends, the standard rates from these providers are not very competitive, and you’re in this savings plan for the long haul.
- · Be clear about your savings goal so you can remain motivated. An important strategy in long term savings is to remain focused because it is easy to lose your motivation over the course of several years of saving. Instead, choose a savings account which gives you strategies to track your savings and stay motivated – these savings strategies could be as simple as entering your savings target when you open the savings account so you can see your goal clearly, or your savings account may chart our progress on a graph in internet banking, or on your statements, so you can see how much you’ve saved, and how much more you have to save to reach your goal by your deadline.
- · Save for a good reason and one which will inspire you in the long term. You may choose for your savings plan to be a long term one because your target is quite large and you need to make a lot of savings to reach it. However, an important strategy in saving is to make sure that by the time your reach your goal, you’ll still want to achieve that goal. Perhaps you have set a savings target for a new engine for your car, or a kitchen upgrade – make sure you think about what you will be doing in your life in the year or two years later when you reach your savings target for this dream. Will you still be in the same house or will you have sold it and moved to a house with a better kitchen? Will you still have the same car or will you have grown out of it? Staying motivated in your savings goals is not only about making sure you are able and willing to make regular deposits to your savings account, but also that you are saving for something worth all the trouble too.
- Set up regular transfers to your savings account to keep you saving. This is one of the most important pieces of savings advice you will find anywhere because it means you can keep your savings on track without being tempted to let your deposits slide. If you set up a regular transfer from your transaction account to your savings account on payday, you are paying yourself first and ensuring that no matter what else you are tempted to buy that week, your savings contribution is taken care of. This strategy is particularly important with a long term savings goal as it is easy to lose interest in making your contributions, or simply forget.
Strategies for Short Term Saving
Saving for short term goals is an important financial skill to have because it allows you to develop good savings habits and still buy things for yourself and your family. By saving up for the short term for things you want and need, you can also avoid using your credit card, and can instead pay with your own money and buy things you can actually afford and this further cements your financial security, and sets a good example for your family.
- · Choose a high promotional rate on your savings account to get you to your goal faster. If you have a short term savings plan, you need to reach your goal as quickly as possible and a high introductory rate will help you do that. Promotional rates tend to run for three or four months and this is the perfect length of time for a short term savings plan – long enough to save without sacrificing too much, and short enough to remain motivated and fulfil your goals. A promotional interest rate on a high interest savings account can be almost 2.00% higher than the standard interest rate, and with interest calculated daily your savings can be steadily boosted from the moment you open the account.
- Calculate your contributions and make an automated plan. Whether you are setting a short term savings goal to get a feel for high interest savings accounts, or because you’ve seen something you want and want to avoid credit card interest, no matter how short your savings term, you still need to plan for it to keep on track so set up regular contributions from your transaction account to your savings account each payday. This means you can be saving without having to manage your savings and when a savings plan is easy, you’re more likely to stick to it.
- · Budget for your contributions to reach your goal and use your interest earned as ‘cream’. The cream on top of your savings is the interest – the extra money you’ll have in your account on top of what you were expecting from your own contributions. To make a real difference to your finances, budget to reach your goal with your own contributions, not taking into account the interest you will earn. When you have reached your goal, withdraw your contributions and use your interest earned to kick start another savings goal, or reinvest it in a term deposit
When you have these few simple strategies in place, it is easy to win the war against all the obstacles which are stopping your from reaching your savings goals – time, motivation, focus and flexibility.