Savings accounts can be a great way to start saving for the future. They don't typically require large minimum deposits, and usually you can easily transfer money from your checking account to your savings account.
Unlike other interest-bearing accounts, such as certificates of deposit (CDs), savings accounts usually offer convenient and frequent access.
Here’s what you need to know about how to start saving with a savings account.
How much should you have in savings
The amount of money you should have in savings depends on your financial goals. Your savings goal can be for anything from building an emergency fund, to putting away money for your next trip, to saving a down payment for a house.
A savings account is a great place to keep your emergency fund. Emergency funds are typically 3-6 months of living expenses. Setting up an emergency fund can be a great first savings goal. From there, you might decide to set bigger goals like saving for a down payment on a car or a house.
How to start saving money
Identify your goals
To figure out how much to save, think about your financial goals. If you want to buy a new car, how much will the down payment be? If you want to take a vacation, how much do you need for travel and accommodations?
Whatever number you come up with, it's usually a good idea to make your savings goal slightly larger. That way, you can cover unexpected costs.
Create a budget
A budget is a spending plan. To start, figure out how much you earn and how much you spend monthly. The difference between those numbers is how much you can put into savings.
To figure out how long it will take to reach your savings goal, divide your savings goal by how much money you can potentially save each month.
Are you happy with how long it will take to reach your goal? If so, you don't need to change anything. If not, figure out a budget so you can save for your goal in a way that suits you.
As the months go by you save toward your goal, you can adjust your budget however you like – the point of a budget is to help you become aware of your spending habits so that you can better align them with your goals.
