By JPMorgan Chase
05 Aug 2024, 08:00 AM EDT
Getting into the habit of saving money is important as it helps build a financial cushion to cover future expenses. Saving isn’t easy, especially when everyday items are at an all-time high given the rise in inflation in recent years. And simply suggesting cutting back on small indulgences can be irritating.
Fortunately, there are options to help save money and make it a habit to better equip you for life’s unexpected needs. Before determining how much you should start saving, first understand your incoming and outgoing money, such as the cost of rent, food, car or public transportation, utilities, and other direct-pay expenses like subscriptions to various streaming services. Apps can help keep track of these recurring expenses, making it a good time to reconsider or renegotiate them.
Once you’ve got your monthly budget figured out, check to see what’s left to determine a workable amount to start setting aside each month. When it comes to saving, there are a number of strategies, from keeping a certain amount in your bank account each week to automating the transfer of money from your checking account to your savings account each month. You can also save for something specific, like a vacation, a home project, or a splurge you’ve had your eye on for a while. Here are some savings account options to consider:
Standard savings accounts are the most common, easy to access and usually open-ended. Savings accounts can often be accessed and managed online or through the bank’s mobile app, which can make things easier. Before choosing the account that best suits your needs, ask if there is a monthly service fee and possible ways to waive the fee.
Money market accounts are similar to savings accounts, but customers receive more interest on their money, which varies from bank to bank. They usually require a minimum balance.
High Yield Savings Accounts are becoming increasingly popular, often coming with higher interest rates, making them suitable for short-term savings goals. They work much like the typical savings account, allowing deposits and withdrawals, but there may be transaction limits and minimum balance requirements. They are also protected up to $250,000 at FDIC-insured banks.
Certificates of Deposit (CDs) are in high demand when interest rates are favorable, but you must commit to leaving the money deposited in the CD untouched for the agreed-upon term, usually months or years. There may be minimum deposit requirements, but they offer returns, so they are useful for short-term goals, such as a down payment on a house or car.
Long-term accounts offer an opportunity to accumulate returns over the years, depending on how the markets fluctuate. These accounts are designed for a specific financial goal and have tax advantages. Check with your financial institution to learn about long-term savings account options, some of which may include:
- 529 Plans: Saving over the years to pay for the education of a child, grandchild, or nephew. Savings are tax-deferred and can only be used for the beneficiary’s education, whether for college or another educational institution.
- 401(k): Retirement savings accounts offered by your employer. Contributions are typically made monthly (a percentage of salary) by direct deposit. There are limits on how much you can contribute.
- IRA: There are several types of individual retirement accounts (IRAs), which offer another option for personal retirement savings. Contributions are limited, they are not necessarily offered by an employer, and like a 401(k) plan, they are only used after retirement.
Be sure to ask your bank or financial advisor if the account you plan to open has a minimum monthly deposit or balance, or any additional requirements or fees. For more budgeting and savings tips, visit chase.com/personal/financial-goals.
+++
For informational/educational purposes only: The opinions and strategies described may not be suitable for everyone and are not intended to be specific advice/recommendation for any individual. The information has been obtained from sources believed to be reliable, but JPMorgaChase or its affiliates and/or subsidiaries do not guarantee its completeness or accuracy.
Deposit products provided by JPMorgan Chase Bank, NA Member FDIC
© 2024 JPMorgan Chase & Co.