Dream big, save big: Savings accounts tips to reach your goals

April 02, 2024 | Alliant Credit Union

Navigating the path to financial security begins with understanding the basics, and a cornerstone of this journey is the savings account. Whether you’re saving for a rainy day, a dream vacation, or long-term goals like a home or retirement, a savings account is crucial in helping you achieve your dreams. Let’s walk through the basics of savings accounts before giving you tips on how to use your savings account for your savings goals.

Understanding savings accounts

What is a savings account and why should you have one?

A savings account is a type of financial account specifically designed for you to deposit money and keep it safe while earning interest over time. In the United States, savings accounts are generally insured by NCUA (The National Credit Union Administration) or the FDIC (Federal Deposit Insurance Corporation), protecting your funds up to $250,000. This means your money is not only growing but is also secure.

A savings account’s main purpose is to provide a secure place for your money to grow. It’s where you can stash funds for future needs, such as emergencies or a long-term plan. While the interest rates are typically lower than other investment options, the safety and reliability of a savings account are unmatched. A savings account also offers a unique blend of flexibility and accessibility. You can add to and withdraw from your savings with ease, making it a practical choice for different types of saving goals.

Having a dedicated place to stash your funds encourages the habit of setting money aside regularly. This discipline is key to achieving different types of goals. These could be short-term, such as purchases of tech gadgets and appliances, hobbies or personal interests, or special occasions. Long-term goals, on the other hand, could be starting your own business, building a college fund for your kids, or planning for your future healthcare or long-term care needs.

In other words, a savings account is more than just a place to store your money. It's an essential tool in your financial toolkit, encouraging saving habits, providing security and helping pave the way towards achieving your financial dreams.

Setting and achieving your savings goals

Setting and achieving savings goals is like navigating a roadmap to success. At the heart of this journey lies a simple yet powerful tool: The savings account. Let’s explore how you can effectively use a savings account to set and reach your financial milestones.

Tip #1: Define clear goals

Your first step is to define what you’re saving for. It could be a short-term goal like a relaxing getaway, or something long-term like a down payment for a house. Be as specific as possible. For example, instead of a general goal like “Save up for a vacation,” think “Save $3,000 for a trip to Hawaii in two years.” By following this, you give yourself a clearer view of what your goals are and when you intend to achieve them.

Tip #2: Set realistic targets

Now that you’ve identified your goals, you need to set realistic and achievable targets to help you meet your goals. This involves carefully assessing your income, your expenses, and the amount that you can comfortably set aside regularly. If your goal is to save $3,000 in two years, you would need to save about $125 per month. Is this feasible with your current budget? If not, you might need to adjust your timeline or find ways to reduce expenses or increase income to meet your targeted deposit amount per month.

Tip #3: Create a savings plan

With your target in mind, create a savings plan. This should detail how much you need to save regularly – be it weekly, bi-weekly or monthly. To make this step effective, incorporate your savings plan into your budget. Consider your savings contribution as a non-negotiable expense, just like rent or utilities.

Tip #4: Track your progress

Regularly monitor your progress. This not only keeps you motivated but also allows you to make adjustments if you’re falling behind or if your financial situation changes. For example, if you receive a bonus at work, you might decide to inject your savings account with an extra amount on top of your regular deposit amount to reach your goal sooner.

Optimizing your savings account for your goals

Now that you've set your savings goals along with their corresponding savings targets, here are a couple of things you can do to maximize your savings account.

Tip #5: Set up automatic transfers

One of the best strategies is to automate your savings to help you stay on track with your goals. Most credit unions and banks offer the option to set up automatic transfers of a specific amount from your payroll account to your savings account on a regular basis. By automating transfers to your savings account, you save money without having to think about it, reducing the temptation to spend that money elsewhere.

Tip #6: Have separate savings accounts for different goals

If you have multiple savings goals, you may want to consider opening separate supplemental accounts for each. This way, you can easily track how much you’ve saved towards each specific goal. For instance, having one account for a long-term goal such as retirement, and another for a short-term goal like a vacation, can help you stay organized and focused.

Before opening multiple supplemental savings accounts, be sure to consider what different types of savings accounts can offer. Traditional savings accounts typically have lower interest rates, while high-yield savings accounts offer higher rates, allowing your money to grow faster. For long-term goals, a high-yield account could be more beneficial. However, always ensure you read and understand the terms, as some high-yield accounts may have restrictions on withdrawals or minimum balance requirements.

A savings account, when used strategically, can be an empowering tool for you to achieve your goals. By setting clear goals, creating a realistic plan, and utilizing the features of your savings account effectively, you can turn your financial aspirations into reality. But it’s crucial to stay disciplined. Resist the urge to dip into your savings account for expenses unrelated to your goals. Remember, every withdrawal from your savings account is a step away from your goals. With consistency, discipline and the right savings strategy, you’ll be on your way to achieving your financial dreams, one deposit at a time.

If you're ready to save, Alliant offers several convenient ways for you to open a high-yield savings account. If you're already an Alliant member, just log in to online banking and select Open a New Account in the left sidebar and follow the prompts. If you're not yet a member, review our savings account or supplemental savings pages for steps on how to apply.

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