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Can you cover a $500 emergency? If you answered no, you are not alone. Most Americans live paycheck to paycheck. Unexpected expenses cause them to spiral into more debt. Let’s break this cycle. A savings account is your first step towards financial success. And you can start with as little as $10.
Why It's Important to Save
Without an emergency fund, people charge their credit card or apply for a loan to pay for unexpected expenses. Without an emergency fund, giant financial headaches can occur. Reduce stress by growing a savings fund that can cover major financial setbacks without going into debt.
Build your savings to cover emergency expenses, have a down payment for a new home, start a child’s college fund or go on a dream vacation. Save money now and experience the benefits later.
Tip: Save 3 to 6 months’ worth of living expenses in an emergency fund.
What is a Savings Account?
A savings account is a place to safely store your money and earn interest. In other words, banks pay you to keep your money in a savings account! You can access your money easily when you need it but check the terms of the account. Typically, you can withdraw funds 2 to 4 times a month without paying a penalty. This will help you resist the temptation to snatch money from your account for the new pair of shoes you’ve been eyeing. In most savings accounts, your money is insured up to $250,000, making a savings account the safest way to build your financial security.
Tip: Open a checking and a savings account at the same time. Use your checking account for your daily living expenses. Keep your savings account separate to reduce the temptation to tap into your funds. Set up a monthly transfer from checking to savings to conveniently build the savings balance.
How to Save
Treat your savings account like a monthly bill. Create a budget so you know how much money you can comfortably set aside into your savings account each month. It doesn’t matter the amount you save; small amounts add up over time. The most important part is that you are saving. Set up automatic transfers so you’re guaranteed to be paid on a regular basis. Your employer can directly deposit a portion of your paycheck into your savings account or you can set up automatic transfers each month from your checking account.
Tip: Pay yourself first or you won’t have money left over to set aside at the end of the month.
When Should I Open a Savings Account?
In one word, now! The sooner the better. No matter how big or small your contributions are, make saving a priority on your financial to do list. Open a savings account and start your journey towards financial stability.