When it comes to finances, it may be the most important thing that you don’t learn in school. Not only is it important to make sure that your credit is great, that you have a steady income, and that you have a budget set up, but it’s also incredibly important to have a savings account with some amount of income going into it every month. Multiple studies have confirmed that most of the people that live in the United States live paycheck to paycheck. This shocking statistic can be anxiety-inducing for those going through it. This is especially true if you do not have a separate savings account, that can be used for emergencies and more. If you want to find out how to get the most out of your money, and to keep your family afloat in hard time, keep reading for how and why you should start a savings account.
The first thing you should do is to understand what a savings account is to be used for. When you have a savings account, it should be used for the most dire of circumstances or as a way to have money that can help you build up your future. These should be two separate savings accounts because you don’t want the two to get mixed. It’s more important to have an emergency savings account than it is a savings account that is to be used just for trips or special occasions. Your savings account is to be used to help you in the case of an emergency, losing your job, or medical costs that can turn your world upside down if you are unprepared for it.
The first savings account that we will focus on here is your emergency savings account. This should be used in the case of dire emergency. If you lose a job, or if you have trouble with medical expenses, or your dog gets sick, this is where you will take the money from. You should be putting at least 10% of your income every month to this account, and it should be used for emergency purposes only. This is important to remember, because even though you may want to buy that pizza really bad at the end of the month, it’s better to have a backup of funds in the case of a dire emergency.
The next savings account we will talk about here is the other savings account. This should be used for extended emergencies and should have at least 3 months of your living expenses covered. While this is impossible to do if you’re living paycheck to paycheck within the beginning of getting your savings account, in around six months, you should have enough money left over to add to this account. This is also important to have because not only can you do things like put down the deposit for a new house with it, but you can also have backup in case your emergency funds run out.
It’s actually quite easy to set up a savings account, and your regular bank should have a option to open one. However, it’s important that you get a savings account that is free, instead of one that charges you monthly. Although there is usually a minimum when it comes to banking, you’ll do a lot better when it comes to saving if you don’t have to shovel out an amount every month. If you want to save to be able to afford this, you will need to start a budget. Start by buying cheaper but great clothing like those from Aerie, prepping your meals, and starting a strict budget.