Bank accounts are an effective place to save money. Forget stashing your cash in the sock draw, a jar next to the door, or in a safe; a bank account is better and should be free.
Here’s how to save money in a bank account
If you’re looking to save money in a bank account, then the interest rate is important. A high interest rate will help grow your money faster and accelerate your savings. Look for banks or credit unions that offer high interest rate savings accounts. These accounts should not have fees for normal banking, if they want to charge you an account keeping fee or transfer fees go somewhere else.
Don’t hide it in your sock draw, hide it in the bank
Your savings account only needs to be accessible in as much as you can check your money is in it and at some point get it back out again. There is no need for ATM access, over the counter withdrawals, or instant transfers to a transaction account. The harder it is for you to get money out of it, the less likely you will, which is the point of saving.
Segregate your money
If you only have one account it’s going to be pretty tricky to have a regimented saving plan. Having three accounts; a transaction, short term saving, and long term saving, is a basic system you could use. Deposit your income into your transaction account and use it for all your spending. Automatically transfer your savings to both the short term savings and long term savings accounts. Your short term savings account is good for annual expense like car registration, holidays, or a new washing machine. The long term savings should be keep, or better still invested, for the future.
Audit your accounts
Just because you got a good deal when you first opened your account doesn’t mean it is still the best product available. Periodically check other bank’s interest rates to ensure yours is still decent. There is no harm in changing banks or moving your money around, over 20 years you will earn about 40% more from interest if you get 5% p.a. instead of 4% p.a. on a $10,000 investment.
Setting up a new account isn’t difficult and can usually be done online from home. By having your savings automatically transferred to a hard to access, high interest rate account you will be set up to save more in your bank account.