Savings Strategies for the New Year

As the new year begins, many people will have their savings top of mind for many reasons – maybe you overspent a bit during the holidays, maybe you’ve been planning on getting your finances in order for a while, or maybe improving your saving habits is an annual New Year’s resolution. No matter what your reasons for focusing on your savings this year, it’s a great resolution to have! There are plenty of different ways to save, each with their own unique advantages. Let’s review some different savings strategies so that you can choose the best option for you!

Savings Account

A savings (aka “share”) account is a secure place to store your money for short- or long-term financial goals. Most financial institutions offer savings accounts at no or low cost, with easy access and liquidity. This makes them a good choice for holding your savings and for building an emergency fund. One key drawback, though, is that savings accounts tend to have lower dividend rates when compared to other savings options.

The lower dividend rate makes it even more important you choose a savings account with little or no fees in addition to offering a competitive rate. If you prize the flexibility that a savings account offers, then you need to maximize the lower returns, not spend it on fees!

Share Certificate

A share certificate, also known as a certificate or savings certificate, is an insured savings account that typically has a fixed dividend rate through a fixed date of maturity (term). These accounts are the credit union equivalent to a certificate of deposit, or CD, that you would find at a bank. The only differences between the two are the name and the type of institution offering them. Share certificates offer a low-risk investment with higher dividend rates than typical savings accounts.

You’ll need to meet some basic requirements when opening a certificate, including a minimum opening balance and a commitment to keep your money in the account for the full term. When opening a certificate, you’ll be given a choice for the maturity term, which typically range from three months to five years. In general, certificates with longer maturity terms will earn a higher rate. While a simple savings account offers minimal returns and maximum flexibility, a certificate account offers much higher returns in exchange for locking in your funds for the entire agreed upon term. If you’re confident that you won’t need to access the money you put into the account during the term of the certificate, this can be a great way to boost your savings.

Money Market Accounts

Another type of dividend-earning account you can consider exploring to take your savings to the next level is a money market account. We’ve talked about how savings accounts offer the most flexibility because you can access your funds whenever you want, but also offer the lowest returns. On the other end of the spectrum, there are certificate accounts, which give great returns but at the cost of locking your funds into the account for a set term. In a lot of ways, a money market account is the middle option, offering a fantastic blend of flexibility and returns.

Our money market account rates are based off of the savings tier your account balance falls in, with each tier up offering an increased rate. The best part? As your balance grows and you cross the threshold, you will automatically move up into the next tier and your rate will automatically increase, so you can rest easy knowing you’re getting the best possible rate on your money market. While these rates are superior to a standard savings account, the money market also allows flexibility – you have access to your funds 24/7, and you can withdraw up to six times each month.

If a savings account’s returns don’t excite you, but you’re not willing to lock your funds into the full term of a certificate, a money market can offer the ideal mix of savings and freedom.

Saving Tips

No matter what financial instrument you choose for your funds, there are some savings strategies and tips and it’s always useful to consider:

1. Set up automatic monthly transfers from your checking account to savings account.
   1. If it’s automatic, you won’t forget about it, you can’t make excuses to spend the money elsewhere, and you’re even less likely to notice the money leaving your checking account to bolster your savings!
2. Set clear goals for both long- and short-term savings.
   1. It’s much easier to stick to your savings strategy when you remember what you’re saving for. Remind yourself what your long- and short-term goals are to keep motivation high.
3. Create a timeline for your savings.
   1. Again, making concrete plans and timelines will help keep you dedicated to your savings plan because you can focus on your goals getting closer instead of the expenses you’re skipping.
4. Build an emergency fund with three-to-six months’ worth of living expenses.
   1. If you’ve worked hard to build your savings, an unexpected occurrence like car issues or a home repair putting a huge dent in your funds can feel like a punch in the gut. That’s why it’s important to build an emergency fund that’s always there for these types of unforeseen expenses. Start small and build over time – you don’t need to have all three to six months’ worth of expenses saved all at once!