Be Savvy With Your Savings

If you are in a good position financially then there is no better time to think about saving money.  Unfortunately many people don't consider this and tend to live for the moment rather than making firm plans for the future.  It's easy to understand, since as long as we have an income flowing in we don't need to worry too much if we don't have a lot of savings tucked away.

This is a pattern which is repeated through a lot of developed countries in the world.  People tend to spend their own currency instead of saving it for some future date which they cannot comprehend; indeed it is one of the reasons why there is such a high level of personal debt in many countries, and very little in the way of savings.

So what can we do to change this pattern?  The real key is to change your focus and play the 'what if' game.  This is especially useful if you do have debt, since you will be putting yourself in a hypothetical situation which can result in some interesting home truths.

For example, let's assume you have some personal debt (and we're talking about unsecured debt here rather than a mortgage, for example) and no savings.  What would you do if your car finally irretrievably broke down and you needed to buy another one?

Short of getting another loan or buying it with your credit card you would be stuck.  Wouldn't it be nicer to be able to pay for it outright?

Everyone should be savvy with their income and start building a rainy day fund for events which may spring up at any time.  It's not just a case of preparing for disasters or emergencies either though – if you have some savings you would be able to plan a short break away or a long weekend without having to stick it on your credit card and pay for it later.

So where should you put your money to make sure you can build an impressive rainy day fund that will be there to use when you need it?

Any rainy day fund should be available to access whenever you want to get at it.  If you use online banking it can be a good idea to get a savings account with the same bank you have your current account with, since you can often go online and shift money between your current account and your savings without any problem at all – it is literally an instant transaction, and it means you can get your cash out of a hole in the wall without needing to visit the bank itself.

Alternatively some savings accounts will give you a cash card anyway, so pick the one that suits you the best.  It's also good to get a reasonable rate of interest, although you will always get less interest on an instant access account than you will if you can leave your money tied up for longer. 

However a rainy day account should only be the first step of a broader savings plan.  Once you have built up a reasonable amount of money in that first account you can look at getting other savings accounts which give you a better rate in exchange for leaving your money there for longer.  Ideally you should have several which all perform different functions. 

But it's not as easy as simply getting a number of savings accounts opened and putting your money in them.  If you don't keep abreast of any changes in the market and in interest rates – whatever country you may be in and whichever currency you are saving up – you could be missing out on a good interest payment.

The truth is that banks and building societies change their interest rates and their accounts all the time, and they make older savings accounts much less attractive to hang onto.  An account that used to earn you a nice rate each year may now only pay a pittance – but not all the banks and building societies will make a supreme effort to let you know about it.

That's why you need to stay on top of what accounts you have and how much they are really earning you.  If you pop into your branch every now and again they will be able to tell you if you still have the most competitive accounts around at the moment; if you don't then it could be time to change or even go elsewhere.

Being savvy with your savings isn't just about saving as much as you can, it's also about putting it in the right places and moving it if necessary.  A lot of people open an account and wrongly assume that it will always be the best option for them, but in fact this is rarely the case.  If you make the effort to stay on top of what is going on then you will always be able to stick with the best accounts and the best places to put your money.

So you see, regardless of where you live, what currency you are saving in, how much or how little you currently have stashed away, there is always something you could be doing to improve your situation.  Some people mistakenly think that their banks will tell them when they no longer have the best account for them, but you should really take the lead and take responsibility for your own situation if you can.  It might seem strange at first if you aren't used to saving or analysing your accounts in this way, but in actual fact it can be an enlightening and intriguing experience.

Where will you be in a year from now?  Will you have one or more competitive savings accounts with an ever increasing balance?  Or will you still be thinking about doing it but never quite getting around to it?  Whatever the answer is, you are the only one who can do anything about it.