The key to saving money

 Saving money helps navigate tricky situations, meet financial obligations, and build wealth. Saving money is vital. It provides financial security and freedom and secures you in a financial emergency. By saving money, you can avoid debt, which relieves stress. However, despite knowing the importance of savings, we often lose sight of it and spend more of our money in the present.

Savings is crucial for everyone, regardless of their earnings, spending, and life stage. Here are some reasons why you need to start saving:

• It offers peace of mind: Knowing that you have a certain amount accumulated for times of your need, gives you peace of mind. You can lead a stress-free life with the knowledge that you will not have to struggle if things take an unexpected route.
• It gives you a better future: Your savings can be the answer to a number of your goals. You can buy a house, accumulate funds for your retirement, or purchase a vehicle.

• You can plan your short-term goals: Savings are not just aimed at the long term. You can also benefit from savings in the short term. A lot of people save for a few months and then travel.
•  It gives your family security in case of an unfortunate event: By saving in a disciplined manner, you can make sure that your family is well-provided for. In unfortunate times, your savings can act as a cushion for your loved ones and help them overcome any financial difficulty.
• It is useful for emergencies: Having money set aside for emergencies helps you in a testing situation. An emergency fund provides financial security in times of need. It can help you avoid using credit cards or taking out high-interest loans. Navigating through a financial emergency in good shape serves as a useful reminder of the value of preserving money.
• It’s important for your child’s education: The cost of education is increasing. Each year, student fees rise, making it more difficult to pay for education without going into debt. It is challenging, but with proper planning and commitment, you can ensure that your children graduate from college debt-free.
• It can help you with big purchases: Since the goal is to save money rather than spend it, you might not consider that expensive purchases are one of the important reasons for saving money. However, there are a variety of reasons you would wish to save funds to purchase expensive items.
•  It helps you with accumulating wealth: If you want to focus on building wealth, you must save money. When you do so, you develop excellent financial practices and increase your cash reserves. It also helps you invest, which is the only way to build actual long-term wealth.

Now that you figured out the importance of saving money, you should know about different types of saving it.

There are several types of savings accounts, and it’s important to choose the one that’s right for your financial needs. Knowing how the various savings account options compare can make it easier to select the right place to keep your money.

1. Traditional or Regular Savings Account

Good for: People who need to save money for the short or long term and aren’t as concerned about getting the best interest rate, expressed as the annual percentage yield (APY).

 Traditional savings accounts are what you may immediately think of when you consider where to save. These are the savings accounts you typically find at traditional banks or credit unions.

Regular or basic savings accounts generally allow you to earn interest on your money, although they usually pay lower rates than other savings products. Many banks and credit unions allow you to open a regular savings account with a low minimum deposit.

The advantages of this type of saving money are that it’s usually easy to open  regular savings account at a branch, and some banks allow you to do so online, you can earn interest on your savings to grow your money, and you can visit a branch if you need help or want to deposit cash.

And the disadvantages are  that the interest rates are usually on the low side, compared to other savings options, monthly maintenance fees may cancel out interest earnings, and additional fees may apply for excess withdrawals.

2. High-Yield Savings Account

Good for: People who want to earn a more competitive rate on savings while minimizing fees.

High-yield savings accounts are savings accounts that offer a higher APY, compared to regular savings accounts.

Online banks often offer high-yield savings accounts to attract savers who want to earn a better interest rate than what is found at brick-and-mortar banks and credit unions. This type of savings account may be appealing if you’re comfortable managing your account through online or mobile banking versus visiting a branch.

It has some advantages like  you could earn a much higher interest rate, compared to traditional savings accounts, online banks typically have lower minimum deposit requirements to open an account, and you’re less likely to be charged a monthly fee at an online bank.

And its disadvantages are that no branch banking access means you can’t deposit cash directly into your account at a branch, transferring money between an online savings account and accounts at another bank can take up to a few days to process, and you may or may not have access to your money via ATM, depending on the bank.

3. Money Market Accounts

Good for: People who want to earn interest on savings while having more options for accessing their money.

Money market accounts (MMAs) combine features of regular savings account with features of a checking account. You can find these accounts at both brick-and-mortar banks and online banks.

These accounts, which may also be called money market savings accounts or MMSAs, allow you to earn interest on your savings. Rates are typically better than regular savings accounts. You may also be able to write checks from your account or access funds with an ATM or debit card.

The advantages are that money market accounts can offer better rates than traditional savings accounts, you may be able to write checks from your account or access your money using a debit or ATM card, and you can open money market accounts at traditional banks or online banks.

And its disadvantages are that a higher minimum deposit may be required to open a money market account, interest rates may be tiered, meaning you’ll need a higher balance to earn the best rates, and banks may charge a monthly fee for money market accounts.

4. Certificate of Deposit Account

Good for: People who want to earn competitive rates won’t need to access their savings right away.

Certificates of deposit (CDs) are time deposits, meaning you agree to leave your money in the account for a set period. During that time, your money earns interest and, when the CD matures, you can withdraw your savings or roll it into a new CD.

You can find CDs at traditional banks and online banks. Between the two, online banks tend to offer better interest rates. CD terms typically range from as short as 30 days or as long as 60 months, with longer terms usually boasting higher rates—although not always, especially in a lower interest rate environment.

CDs are best for the money you know you won’t need immediately, since banks can charge an early withdrawal penalty if you withdraw your savings before the maturity date. Creating a CD ladder of multiple CDs with varying maturity dates can offer a work-around for this issue.

Its advantages are  that CDs can offer above-average interest rates for savers pursuing short- or longer-term goals, there are typically no monthly maintenance fees involved with CD accounts, and CDs at online banks may offer lower initial deposit requirements.

And its disadvantages are  that withdrawing money from a CD ahead of its maturity date may trigger an early withdrawal penalty, CDs at traditional banks tend to offer lower interest rates than those offered by online banks, and putting your savings into a longer-term CD makes it harder to capitalize on future interest rate increases.

5. Cash Management Account

Good for: People who want to keep cash available to invest in their brokerage or retirement account.

Cash management accounts aren’t savings accounts per se. Instead, these accounts let you hold the cash you may plan to invest in a taxable brokerage account or a retirement account.

Online brokerages and Robo-advisor platforms may offer cash management accounts to their investors. The money held in the account can earn interest, often at a higher rate than what you’d get at a bank.

Depending on the brokerage, you may get all the standard features you’d expect with a checking account as well. For example, you may be able to write checks, pay bills, or transfer funds to accounts at your bank.

The advantages are that they’re a convenient way to earn interest on  the money you plan to invest, cash management accounts can offer benefits and features of both checking and savings accounts, and accounts can be FDIC insured when offered by a third-party bank.

And its disadvantages are that high-yield savings accounts could offer better interest rates on the money you’re saving, since they’re attached to online brokerage accounts, you may not have access to branch banking, and these accounts aren’t always covered by FDIC insurance.

6. Specialty Savings Account

Good for: People who want accounts tailored to specific savings goals.

Specialty savings accounts are designed to help you reach specific savings goals, rather than being a catch-all for the money you don’t plan to spend. And, in some cases, they can be intended for a specific type of person, rather than a goal.

The advantages are they can help you save money for a variety of specific financial goals, specialty accounts can earn interest to help you grow your money, just like other savings accounts, depending on the account, you may pay low or no monthly maintenance fees.

And its disadvantages are some specialty accounts, such as IRAS, 529s, and HSAS, have strict tax rules for making withdrawals, the interest rates you earn for things like child savings accounts, student accounts, or Christmas club accounts may be lower than high-yield or even regular savings accounts, and specialty accounts may have restrictions on who can open them.

Multiple Savings Accounts for Multiple Goals

When choosing a savings account, it’s important to remember that you don’t have to pick just one. Depending on what you want to achieve financially, you may decide to open multiple savings accounts, CD accounts, money market accounts, or specialty accounts. Just be sure to pay attention to the interest rate you could earn and the fees you may pay, to be sure you find the best accounts for your needs.

In the following, we want to talk about money-saving strategies that will surely benefit everyone:

1. Accumulating wealth:

If you want to focus on building wealth, you must save money. When you do so, you develop excellent financial practices and increase your cash reserves. It also helps you invest, which is the only way to build actual long-term wealth.

2. Record your expenses

The first step to start saving money is to figure out how much you spend. Keep track of all your expenses—that means every coffee, household item, and cash tip.

Once you have your data, organize the numbers by categories, such as gas, groceries, and mortgage, and total each amount. Use your credit card and bank statements to make sure you’re accurate—and don’t forget any.

3. Budget for savings

Once you have an idea of what you spend in a month, you can begin to organize your recorded expenses into a workable budget. Your budget should outline how your expenses measure up to your income—so you can plan your spending and limit overspending. Be sure to factor in expenses that occur regularly but not every month, such as car maintenance.

4. Find ways you can cut your spending

If your expenses are so high that you can’t save as much as you’d like, it might be time to cut back. Identify nonessentials that you can spend less on, such as entertainment and dining out. Look for ways to save on your fixed monthly expenses like television and your cell phone, too.

Here are some ideas for trimming everyday expenses:

• Use resources such as community event listings to find free or low-cost events to reduce entertainment spending.
• Cancel subscriptions and memberships you don’t use—especially if they renew automatically.
• Commit to eating out only once a month and trying places that fall into the “cheap eats” category.

5. Set savings goals

One of the best ways to save money is to set a goal. Start by thinking of what you might want to save for—perhaps you’re getting married, planning a vacation, or saving for retirement. Then figure out how much money you’ll need and how long it might take you to save it.

Tip: Set a small, achievable short-term goal for something fun and big enough that you aren’t likely to have the cash on hand to pay for it, such as a new smartphone or holiday gifts. Reaching smaller goals—and enjoying the fun reward you’ve saved for—can give you a psychological boost that makes the payoff of saving more immediate and reinforces the habit.

6. Decide on your priorities

After your expenses and income, your goals are likely to have the biggest impact on how you allocate your savings. Be sure to remember long-term goals—it’s important that planning for retirement doesn’t take a back seat to shorter-term needs.

Tip: Learn how to prioritize your savings goals so you have a clear idea of where to start saving. For example, if you know you’re going to need to replace your car soon, you could start putting money away for one now.

What is the 30 day savings rule?

The 30 day savings rule is a simple financial trick that can help anyone improve their money management techniques.

Using this rule is pretty straightforward. The next time you find yourself thinking about making an impulse purchase or simply buying something that you don’t need, close your browser window or walk out of the store because you’re not going to buy that item.

With the 30 day savings rule, you defer all non-essential purchases and impulse buys for 30 days. Instead of spending your money on something you might not need, you’re going to take 30 days to think about it.

At the end of these 30 days, if you still want to make that purchase, feel free to go for it. Alternatively, if you forget about that purchase or you decide that it wasn’t worth it, you’ll have saved yourself a chunk of change as you work toward your financial goals.

In fact, what makes the 30 day savings rule so special is its simplicity. By forcing yourself to wait on all your non-essential purchases, you take emotions out of your spending so you can maximize your savings.

Of course, the rule only works if you stick to your convictions and wait the entire 30 day period. If you do manage to follow through with the plan, though, you’ll almost always find that you save money using this strategy.

Here are 3 steps you can take to integrate this simple savings plan into your day-to-day life.

1. Identify needs vs wants

Any newcomer to the 30 day savings rule needs to start by identifying essential and nonessential purchases so you can figure out what is and isn’t an actual necessity.

Take a few minutes to make a list of your monthly expenses. Then, make a mental note to yourself that these purchases all get instant approval under your new savings plan. Everything else can get categorized as a “want” and will be subject to the 30 day savings rule.

Later on, while you’re out in the world shopping, you’ll need to think about whether your potential purchase is a want or a need and make your spending decisions accordingly. If you’re considering an impulse purchase, simply put your wallet away and save your money for another day.

2. Have a savings account ready to go

One of the best parts about the 30 day savings rule is that it allows you to build your savings. while you wait to see if that pair of shoes or new smartphone is worth your hard-earned money.

Although you could just leave your money sitting in your regular ol’ bank account as you make your decision, setting aside your money in a TFSA, RRSP, or other high-interest savings account can help you accrue interest in the meantime.

To make things even simpler, soon enough you’ll be able to set up KOHO Save and turn your entire KOHO account into an interest-producing machine. That way, all of the money that you don’t spend can make you money in the short term.

3. Set up an entertainment fund

Putting too many limits on your spending habits can make it harder to stick to your spending resolutions. While the 30 day savings rule is great for those big-ticket items, consider setting up an entertainment fund for little expenses that you can dip into whenever you’d like – guilt-free.

Your entertainment fund can be as big or small as you’d like, but we’d recommend budgeting only a modest sum each week to ensure that your fun doesn’t detract from your savings.

If you don’t quite have enough wiggle room in your monthly budget to accommodate an entertainment fund, try setting aside your cashback earnings and Round-Ups for this purpose. It might not seem like a lot now, but if you take advantage of the cashback benefits that come with your KOHO account, you’ll be surprised how much you can save.

In conclusion, saving money is one of the essential aspects of building wealth and having a secure financial future. Saving money gives you a way out of the uncertainties of life and provides you with an opportunity to enjoy a quality life. Putting aside a sum of money in a systematic manner can help you steer out of many hurdles and obstacles in life.

It can support you in your hour of need and ensure that your family has something to fall back on in case of an unfortunate event. So now that you understood the key to saving money, try to implement this strategy in your life routines.