3 Savings Accounts Everyone Should Have
When we think to get our finances together, oftentimes we think about building credit and restoration, investments like stock or real estate, and debt management. While all of these things are important to level up, we have to make sure we are not just focusing on one aspect of our financial journey. One of the most vital parts of our financial standing is savings. Having solid savings can help you pay your past, cover unexpected expenses with no worry, and invest in the future. The earlier you start, the better. You don't lose by saving. How aggressive you save and where you invest your savings is a personal judgment call that you can discuss with your financial coach. However, here are three types of savings that you should include in your spending plan. If you don't have a spending plan, well that's another story.
Protip: START ASAP. You don't have to have a lot of money to start saving but you have to start. Having a savings account is the foundation for financial success. You may not think you have made enough money to save but trust me it's available somewhere.
1. Emergency Savings
We all know that emergencies can happen at any time. You can think it was all good a week ago and now you may be faced with an unexpected emergency that could possibly put you in a bad space financially. Having an emergency savings account makes it possible to cope when unthinkable situations arise. Having a difficult situation is enough, so you shouldn't have the added stress of how to fix it. This account is reserved for dire immediate needs:
Ex: If your job ends and there is no hope for obtaining another in the near future; you have a serious accident that makes it impossible to earn income for months; overwhelming expenses that reduce your earning.
You can set a series of emergency funds goal. First, you can start with enough to cover one month’s rent or mortgage. Then you can add to the emergency fund to reach one month’s income. Keep adding to emergency savings, bit by bit, indefinitely. It is ideal to set yourself up to where your emergency savings fund up to eight months of expenses.
2. Set-aside savings
Set-aside savings are for smaller unforeseen circumstances but may fall outside of the day to day spending such as when your car breaks down or you need new tires. Set aside savings covers both predictable and unpredictable expenses that can range from a tax bill or vehicle maintenance. These things are inconvenient but it doesn't have to be something that causes you to have a set back financially. You shouldn't have to get a loan for inconveniences. It can be easy to go to your set-aside savings to care of business without worry.
Set-aside savings can be used for vacations, holiday shopping, working your way out of debt, and any other special goals that you may have! I've found the perfect app called Digit that is easy to use and convenient to start your set-aside savings. I use this app and I love it! Digit automates your savings and you have fun control to manage where your money is going! You can easily see your money adding up to reach your savings goal and funds for your "small", unexpected expenses. Give savings a try!
3. Retirement Savings
If you are working a 9-5 and your job offers a 401K plan (especially if they have a match program) then go for it! I don't think there is a reason that you should not start investing in your retirement. The earlier you start, the better. There are a lot of people that don’t quite believe in it. However, I will be the first to tell you it is worth it. I remember working at a company for a year, and I did not enroll in a 401K plan. I had received enrollment forms, however, I missed the deadline! A 401K match program means your employer will match the same amount or percentage that you pay towards your retirement. So that means if I allocated $40 every two weeks, then by month-end $80 dollars weren’t put away rather $160. Not to mention that my allocations went into mutual funds that earned extra dollars. 401K has small returns and I am not advocating a 401K plan as a retirement savior but an option. When you think about what you may spend $80 dollars on, why not set aside money into your 401k if it is offered? Now, how you invest and how aggressively you save depends on so many factors that it best to talk to a financial professional to see what is best for you. Everyone's financial journey is different and you should get one on one advice to get you started. Don't waste time trying to wing it.
Now, just because you have your 401K plan in place it doesn't mean that you are all set. There are a few other options that you are available to secure retirement. Again, your options are personal to you so I won't offer blind advice. Your pension or 401K plan may not cover your lifespan for retirement, but you don't want to wait to start looking for additional options for retirement security. Just imagine by the time it is time to retire, the company files for bankruptcy or eliminates pension, or if the economy no longer supports Social Security. All I know if the early you start, the better. Do yourself the best service and seek further options so that you can live the best-retired life; one that you can stay retired.
You might surprise yourself if you just give savings a try. It doesn't hurt to put money aside so that you can do the things that you want.