You hear it all the time: “You’ve got to start saving!”
Totally true, but what’s the best way to get started? And, with so many savings options out there, what’s the right account for you? We’ll help you figure out which account is best for your needs, and how to make the most of it.
How Long Do You Have to Save?
The first step is to narrow down your savings goals, as well as your time frame. Knowing what you hope to achieve—and by when—is important to getting started on the right path and choosing the best option to meet your needs. You can separate your savings goals into short-, medium-, and long-term options. Typically, short-term refers to under one year, medium-term is 3–5 years in the future, and long-term is anything more than 10 years away.
Examples of short-term savings goals include establishing an emergency fund or saving for this year’s holiday presents for your loved ones. Medium-term goals can include saving for a new car, a down payment on a house, a vacation, or wedding. Saving for retirement and your children’s college tuition is usually a longer-term goal, depending on what stage of life you’re currently in.
What to Look for In a Savings Account
- Federal insurance. First and foremost, you want to keep your money safe at a federally insured financial institution like your community credit union, where members’ funds are insured by the National Credit Union Administration.
- At least some of your savings should be easily accessible, whenever you need it. You don’t want all your funds to be tied up when you have an emergency and need access to your money quickly. You should be able to withdraw your savings in person at a branch, by using an ATM, or transferring funds online. Although there used to be a six-per-month limit on certain withdrawals from your savings account, the Federal Reserve has temporarily lifted this rule due to COVID-19.
- Competitive rate. The whole point of a savings account is to help your money grow, and for that to happen, you need to earn dividends on your funds. Otherwise, you might as well stuff the cash under your mattress (we’re kidding, don’t do that). Earning a great rate is especially important for your long-term savings, which have more of an opportunity to compound over time.
- Low or no fees. Carefully review your options and select a savings account with no fees, or fees that can be avoided by meeting minimum balance requirements. At USE Credit Union, monthly fees are waived for our Advantage Savings Account if you set up an automatic transfer of at least $35 from your USECU Checking Account.
What Type of Account Is Right for Your Needs?
- Savings accounts. For short-term savings like your emergency fund, a basic savings account is probably your best bet. With your money federally insured to at least $250,000, easily accessible, and growing safely, you’ll be able to have peace of mind knowing you’re prepared to cover unexpected expenses. USECU members also have the option to open a Holiday Savings Account, which lets you save little by little throughout the year, earn a great rate, and receive all your money in one lump sum before the holidays.
- Money market accounts. Similar to savings accounts, money market accounts are a great option to keep your savings easily accessible while they grow. These dividends-bearing accounts are recommended for either short- or medium-term savings goals. They typically have higher rates than a basic savings account, but they might also have higher minimum balance requirements. Many money market accounts also offer tiered rates so the more you save, the more you earn.
- Term certificates. For medium- to longer-term goals where you won’t need immediate access to your money, consider getting a term certificate, a credit union’s version of a certificate of deposit (CD). While they may require a larger opening deposit than a savings account, they typically offer even higher dividends. With fixed rates, they are safer than the stock market, and they come in a variety of terms (from several months to multiple years), so you can choose how much you want to save and for how long. But keep in mind, you’ll need to hold your funds in the certificate until it matures to avoid an early withdrawal penalty, which would cut into your earnings.
- IRA term certificates. These specialized term certificates are designed especially for retirement. If you have earned income, a traditional or Roth IRA could be the ideal way to grow your retirement savings while keeping them protected from the stock market’s volatility.1
Tips to Boost Your Savings
- Pay yourself first. Don’t wait until the end of the month to save whatever is left over (if anything). Make saving a priority and put money aside before you pay your bills each month. You can set up automatic transfers from your checking account to your savings, or you can even ask your employer to direct deposit part of your paycheck into your savings account.
- Spend less. Decrease your monthly expenses to increase the amount of money you are able to save. Reduce or eliminate non-essential items like restaurant meals, designer clothes, new electronics, and subscription services. Deposit the money you would have spent on these items into your savings account instead. Our free Money Management tools make it easy to set a budget and track your spending.
- Earn more. Focus on boosting your savings with any new earnings. For example, if you get a raise, you should increase your savings by the same amount. You could also get a second job or start a side hustle to bring in extra money. Just make sure you watch out for lifestyle creep and save your additional income instead of spending it.
How We Can Help
As a not-for-profit financial institution, USE Credit Union is here to help our members make the most of their savings with a wide range of accounts for every stage of life. Whether you’re just starting to save or want to build your retirement nest egg, we’ll help you find the option that’s right for you.
Connect with us to learn more.
Must meet membership and account opening criteria.
1. Consult with a tax professional.