Admit it, saving is harder than spending money. You can do more and buy whatever you want when you forget about saving money. It is less stressful if you don’t follow a certain budget. And in addition, you’ll always have the time and resources to join your friends every Friday, when the work week is over. Spending money as you receive instead of putting it in a savings account is very tempting, especially those who believe in the YOLO philosophy. However, not having a savings account, and in return, no amount of savings, might be more damaging than it seems.
According to Time Magazine, almost one-third of the country are underbanked or are not covered by a full range of basic financial services. In addition, one out of nine households doesn’t have a bank account. And not surprisingly, people with low-income makes up the majority of the underbanked people, according to FDIC. What makes saving hard for some people and why? What are the pros of owning a savings account and what are the most common savings account someone can open in bank accounts? And what are the tips to save more money for future needs?
Why Some People Don’t Have Any Savings? 1. “Not enough money” The first and the most common reason why a lot of people cannot save enough money is that they don’t have enough money to save in the first place. Different factors play important roles in this reason. One of the common reasons is because of the high prices of basic needs, especially rent or mortgage. Another factor is when the salary is basically just enough (or even less) than what needs to be spent in a month. In addition, a lot of people have a lot of extra expenses just to go to work, such as commute and food. Living from paycheck to paycheck monthly can push savings out of priorities.
2. Distrust to banking institutionsA lot of people, especially recent immigrants, tend to doubt the safety of banks. This is partly because of their fear of paying $25 for charges if they bounce a check or make a banking error. Another reason for their dislike in banking institutions is the fact that paychecks can make money available in an instant. This reason is partly because of the next reason why a lot of people doesn’t have a savings account.
3. Lack of financial literacyAlthough banks have been in existence for quite some time, a lot of people doesn’t know how a modern bank works. Mobile banking, even though it is efficient and easy to use, seems like a daunting technology for people who have low income or lacks education. Living from paycheck to paycheck or from cash to cash is more convenient to them, as they don’t want to deal with things such as debit, credit, and interest rates.
4. Banks might be “expensive” There is also a belief that banks can be “expensive”, and by expensive means that there is no low-cost banking service available in a place. Low-income people will need to get a certain amount of requirement (maintaining balance) in order to make an account. Some are also afraid that banking fees will drain their money faster when accumulated. However, withdrawing using a paycheck is actually costlier than paying banking fees.
The Five Advantages Of Owning A Savings Account1. Its better than borrowing moneyA lot of people prefers borrowing instead of saving their own emergency fund. Borrowing is costlier and can affect your monthly budget more than your savings. When you cannot pay in time, you will be accumulating a lot of interest and pays more than you borrow. Meanwhile, in savings, the interest rate will actually benefit you.
2. Emergency FundA lot of things happen in life, and most of those things are unexpected. If something bad happened to you, and you don’t have an emergency fund, you and your family will suffer from it. An emergency fund is essential to all households because you can never know if something might happen to you, and on the same page, you might not be able to work anymore.
3. More options and flexibility of usageSavings are not only for emergency funds. You can also save to spend, an example of this is when you’re saving up to buy a car or a new phone. Although this can also be done by borrowing, late payments will get you at risk of paying for more than you owe.
4. Weather out inflationThe money five years ago is not the same as the money now. Yes, inflation is a real thing, and it’s not really a good thing for your money if you put it in a box, per se, and leave it for five years. However, if you put your money in the bank, the annual yield from interest rates can help in weathering out inflation.
5. Savings account helps in savingA savings account can help in “saving”, in a sense that when the money is “out of sight”, it is also “out of mind”. You can easily save money when you don’t see it not be tempted to make an impulse buying to everything you see.
Tips In Saving Up Money1. Save “Automatically” One of the most effective ways to save is to save “automatically”. This means that every month, a portion of your salary will automatically be deposited in your savings account. That way, you don’t have to manually make the deposit. Basically, you will not be able to “forget” saving again.
2. Make a financial goalIt is easier to save money if you have a financial goal in mind. Your financial goal can be either short-term or long-term, or even both. As long as you have a goal in mind, you can work it out and make your own technique of saving. Financial goals can be any goals, like saving for your education, for a new car, or even for a trip that you want to do a long time ago.
3. Save your bonuses and overtime payBonuses and overtime pay are often looked upon as “free money” or “easy money” so people would be tempted to spend it. However, easy money or not, money is still money, and saving each penny will bring you nearer to your financial goal.
4. Don’t upgrade lifestyle after a pay raiseSo you received a raise, which means that you now have more buying power. You can finally afford the luxury of eating out in a fancy restaurant once a week. Would that be satisfying? Yes. But would that be rational? The answer is no. If you’re satisfied with your current lifestyle, you don’t have to upgrade it. Use the extra money for saving or more investments.
5. Cut expenses you don’t really needYou might think that Netflix subscription is something that you will not live without. After all, a lot of shows and even movies are on Netflix or other streaming subscription sites. You can still find alternative entertainment for free, so you might want to opt for that instead of paying for things that you don’t really need.
Saving is hard and requires a lot of effort, mostly due to the fact that spending is more satisfying than saving. However, if you save properly, you can feel more financially secure and become and grounded. Start saving now by opening your own savings account and follow through by depositing regularly. Every penny counts when it comes to savings.