Savings Accounts
October 26th 2009 10:08
I want to talk today about the importance of savings. Whether you are saving for a rainy day, a car, a house deposit, or a new handbag, putting money away can help you to reach those goals.
There are many reason people save. It’s important to work out your goals, as it gives a purpose to missing a certain amount of your pay check, and makes you more likely to stick to it. Try sitting down with a piece of paper and pen, and write out all the things you would like to save for.
There are many different types of savings accounts available, but for the sake of ease, I’m going to focus on online savers for this post. They are an easy way to save, and readily available.
There is a fantastic website called Rate City, where you can compare the features and interest rates from several of the leading financial institutions. If you look closely, you will notice a max rate and a base rate. This base rate is the important one, as it lets you know how hard your money will be working once the promotional rate is over.
According to the site, currently UBank is in the lead, with 5% interest for both the base and max rate. They have no fees, can do automatic savings plans, and interest is paid monthly.
Let’s do a little bit of math now. I want to start out by saying these calculations have been worked out assuming interest is paid annually, so please excuse any discrepancies between my figures and the savings calculators on the various websites. We’ll assume you are putting money away simply for a rainy day. If you were to put $100 per month away, in an account earning you 5% interest, after a year you would have $1,260. The following year you would have $2,583. I know I would sleep better at night knowing I have a $2,583 safety net around me.
Another scenario we can use is saving for a house deposit. Let’s assume you need $10,000 for a house deposit. If you were to save for it over 4 years, you would need to produce $2,500 in savings. Breaking it down into monthly figures, you need to put just over $200 per month into your savings account to reach your goal. That doesn’t sound so bad does it? (This is of course barring your account’s interest rate; you could most likely end up with more at the end of the 4 years).
Let’s look long term now. Say you were to put money into a savings account and forget about it. Just pretend it’s not there. If your account offered you 5% interest per annum, and you put $1,000 a year away, after three years you would have $3310.13 in savings. After year 5, you would have $5801.92, and after 10 years you could have $13,206.81. What would you do with $13,000? Even if you can’t come up with an answer, wouldn’t it be nice to have the option of needing one?
It’s your money, how do you want it to work for you? Savings would have to be one of the safest means of growing your money. It isn’t a get rich scheme, but it can certainly put you in a better place financially, as well as increase your own personal independence.
There are many reason people save. It’s important to work out your goals, as it gives a purpose to missing a certain amount of your pay check, and makes you more likely to stick to it. Try sitting down with a piece of paper and pen, and write out all the things you would like to save for.
There are many different types of savings accounts available, but for the sake of ease, I’m going to focus on online savers for this post. They are an easy way to save, and readily available.
There is a fantastic website called Rate City, where you can compare the features and interest rates from several of the leading financial institutions. If you look closely, you will notice a max rate and a base rate. This base rate is the important one, as it lets you know how hard your money will be working once the promotional rate is over.
According to the site, currently UBank is in the lead, with 5% interest for both the base and max rate. They have no fees, can do automatic savings plans, and interest is paid monthly.
Let’s do a little bit of math now. I want to start out by saying these calculations have been worked out assuming interest is paid annually, so please excuse any discrepancies between my figures and the savings calculators on the various websites. We’ll assume you are putting money away simply for a rainy day. If you were to put $100 per month away, in an account earning you 5% interest, after a year you would have $1,260. The following year you would have $2,583. I know I would sleep better at night knowing I have a $2,583 safety net around me.
Another scenario we can use is saving for a house deposit. Let’s assume you need $10,000 for a house deposit. If you were to save for it over 4 years, you would need to produce $2,500 in savings. Breaking it down into monthly figures, you need to put just over $200 per month into your savings account to reach your goal. That doesn’t sound so bad does it? (This is of course barring your account’s interest rate; you could most likely end up with more at the end of the 4 years).
Let’s look long term now. Say you were to put money into a savings account and forget about it. Just pretend it’s not there. If your account offered you 5% interest per annum, and you put $1,000 a year away, after three years you would have $3310.13 in savings. After year 5, you would have $5801.92, and after 10 years you could have $13,206.81. What would you do with $13,000? Even if you can’t come up with an answer, wouldn’t it be nice to have the option of needing one?
It’s your money, how do you want it to work for you? Savings would have to be one of the safest means of growing your money. It isn’t a get rich scheme, but it can certainly put you in a better place financially, as well as increase your own personal independence.
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