One of the best ways to save money is to open an online savings account and make deposits automatically for a long period of time. This is a great way to become an online saver and start a retirement savings account.
This is your “Rainy Day” savings for when bad things happen like unplanned car repairs, you need to buy a new water heater for your home, your furnace breaks, you lose your job and need to continue to pay the bills for a few months, etc. This is NOT an account to be used for “fun” stuff like a new computer, dinner and a movie, etc.
The minimum to open up one of these accounts is $1.00. Then, setup an automatic monthly deposit and feel your security grow. Increase your monthly deposit annually or as you earn more money.
Here’s how to do it:
- Browse over to HSBC Bank or EmigrantDirect.com which is a division of Emigrant Savings Bank and open up a high interest savings account online. A note on high interest and high yield savings accounts: It’s relative to the economic conditions. For example, in 2007 you could earn 5.05% interest and in 2010 you could earn around 1.00% interest rate for an online savings account. You can find other ways to save money, but to start saving money, opening an online savings account will get you going quickly.
- Do NOT pick the option that you want an ATM card. This account will be for deposits only for the majority of its life. We don’t want to be withdrawing money using an ATM card. Why? Because it happens all the time. You’re out on a Friday night and you’re short of funds to enjoy a few hours of fun. So, you decide to use your ATM card and withdraw funds from your “Rainy Day” account. Do this for a few Friday nights and see what’s left over when you really need it.
- Link it to your bank checking account so you can setup a monthly deposit from your checking account into this account. The point is to make the deposit automatic so it happens monthly. If you don’t make it automatic, most likely it won’t happen. Check your bank to make sure no fees are incurred at either end of the transfer.
- Check your balance monthly, quarterly or however many times you need to, to feel comfortable knowing that your savings is growing automatically.
FDIC Insurance
Wherever you end up saving your money whether it’s online, a local bank or a credit union, make sure it’s federally insured for the full amount. Check with the institution where you are saving your money to find out. Other resources you can use are www.myfdicinsurance.gov and www.ncua.gov for credit unions.
Mindset
Your mindset needs to be that this is actually cash you have saved and not emergency funds based on stocks, credit cards or a Home Equity Line of Credit (HELOC). You need to keep your money safe!!
This is your emergency fund or “stash”. Depending on how the economy is doing, try and get it to grow where there’s 3, 6, or even 8 months of your income saved. Ask yourself, “What would it take to cover 3, 6 or even 8 months worth of my expenses if I was out of work in the current economy?”
With consistent automatic deposits over a long period of time and making this part of your budgeting and money management, you will reach your savings goal.