Managing your savings account this Monday

Building savings is a crucial goal for every customer, and something that is relevant to everyone, according tohttp://www.credit.org.

Putting too much into savings can set you up for failure just as surely as saving too little. If you leave your current account short of what you need to pay all of your bills, you will have to dig into your savings, defeating the purpose of your savings account.

Start modestly and only increase the amount you put into savings if you are able to afford to live without the money. After a few months of getting used to a new budget, you will hopefully find that you can increase the amount your save. Ultimately, your goal will be to save 20 per cent of your earnings, but that full amount probably won’t be obtainable until you have paid down your debts.

Most people have a current and savings accounts with the same financial institution. It is very easy to transfer funds back and forth between the two accounts – many banks let you use a web site to transfer funds immediately. This is convenient when moving money into savings, but usually it’s too convenient when it comes to pulling money out of what should be a long-term savings account.

Sometimes, it is better to find an entirely separate bank, even an onlineonly bank, and transfer funds to it for savings purposes.

Some of these online banks offer the best interest rates on their savings. If you look around, you may be able to earn as much as four per cent on your savings. That’s not enough for your retirement accounts, but it is a lot better than the typical bank account.

Also consider a local credit union with fewer branch locations for your savings. The goal is to make the money a little less convenient to access in the hope that the funds will stay in the bank rather than end up in your pocket.

When to start investing your savings

If you have huge funds in your account, enough to cover you for at least six months, and you want to see your money grow over the long-term, then you should consider investing some of the funds, according tohttps://www.moneyadviceservice.org.uk.

The right savings or investments for you will depend on how happy you are taking risks and on your current finances and future goals.

Returns are the profits you earn on your investments.

Managing investments takes time and money, and service providers will charge a fee. This cost can eat into the returns you will receive and it is something you should ask about before you invest.

The money you place in secure deposits such as savings accounts risks losing value in real terms (buying power) over time. This is because the interest rate paid won’t always keep up with rising prices (inflation).

On the other hand, index-linked investments that follow the rate of inflation don’t always follow market interest rates. This means that if inflation falls you could earn less in interest than you expected.

Stock market investments may beat inflation and interest rates over time, but you run the risk that prices may be low at the time you need to sell. This could result in a poor return or, if prices are lower than when you bought, losing money.

When you start investing, it is usually a good idea to spread your risk by putting your money into a number of different products and asset classes. That way, if one investment doesn’t work out as you hope, you will still have others to fall back on. This is called ‘diversifying’.

The various assets owned by an investor are called a portfolio. As a general rule, spreading your money between the different types of asset classes helps lower the risk of your overall portfolio underperforming.