Almost everyone aspires to greater financial capacity. Be it a dream house or wedding, family vacation or school fees, we find ourselves needing more money to be able to afford the things we need/want. An often overlooked but effective tool that can help in achieving these goals is a good ol’ savings account.
As the name implies, a Savings account is an account in which you set aside funds for a specific purpose, or rainy day. Most Savings accounts come with incentives which help you build the required discipline to reach your savings goals. Some of these incentives include competitive interest.
One of the major draws of savings accounts is that they are incredibly easy to open and operate as they require minimal documentation. Also, as previously mentioned, a savings account could help you earn interest. The interest rates may not be as high as some investment options offer, but unlike investments, the risk of losing funds in your savings account is almost zero. Your funds are secure in the bank and have the added benefit of being insured.
Another great benefit of savings accounts is that you can easily access your funds through digital channels like online banking and mobile apps. This can come in handy in case of emergencies. So, even if you have no immediate needs or goals to save towards, it is still advisable to save for the proverbial rainy day.
Now that you’ve seen its features and benefits, here’s how to utilize a Savings account to achieve your goals.
First off, decide what your goal is, how much you need to achieve it and how much time you have to save up. If it’s a summer vacation, for instance, determine where and when. Then, research all associated costs including flight tickets, accommodation, visa costs if needed, etc.
If you’re saving for a rainy day and not towards a specific goal, you can determine to save a proportion of your income every month. It is generally advisable to save around 20% of your monthly income, with 50% going to necessities and 30% to discretionary items. However, depending on your capacity, you can decide to save as much or as little as you can afford.
Now that you have your goal amount, break it down into monthly savings goals. At this point, if you discover that you aren’t able to afford it, you can go ahead and revise your goal. Using our previous vacation example, you can either pick a more affordable destination or push your travel dates backward to allow you enough time to save up the required amount.
Visit your bank and open a savings account if you don’t already have one. Most banks require some form of identification, so make sure to take one along with you when you go. A great tip is to set up monthly direct debits from your salary/current account; that way your monthly contributions to your savings account are automated. If you intend to make cash deposits, you should set up a recurring reminder on your calendar. As much as possible, try not to miss any monthly payments so as not to delay or completely derail the achievement of your goal. Besides achieving goals, a good savings habit helps you build financial discipline, which is an important skill to develop.
Watch your nest egg grow steadily and when the time comes, utilize the funds towards your goal, pat yourself on the back for a job well done and then go again.
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This article is intended to provide general information about finance and investments and does not replace or should be taken as professional financial advice. The content reflects the view of the author of the article and does not necessarily reflect the views of Citi or its employees, and we do not guarantee the accuracy or completeness of the information presented in the article except information on Citibank N.A. – UAE products referenced herein.
