How to manage your Saving Accounts?

For most of us, the idea of saving began from our early childhood where we used to save our money in our piggy banks. As a kid, the importance of saving was instilled in me by my mom, who made sure that I understood the dynamic of money, yet not get overwhelmed by it. 

My mom always said “If we aren’t smart with our money, our money will make us dumb”, which makes so much sense now, when I am earning and paying my bills. Saving is one aspect of our finances that is important no matter what stages of life we are in. However, saving from an early age is important! A quick look at this chart from JP Morgan Asset Management would explain things better.

Here are a few tips to manage your saving accounts and make the optimum use of them:

The first step to manage your saving is to understand the purpose of it. It’s difficult to accomplish something without understanding why you should do it. Why should we save and put in all that effort? Hence, understanding your financial goal is critical if you want to stick with a saving plan for the long term.

Once you have a clear financial plan, create a separate account for it. I usually suggest people have at least 2 separate accounts (if possible 3 to 4 depending on your requirements). This is the reason why you need to have a clear understanding of your financial goal before you start saving because it might be overwhelming to manage different accounts.  

Here are the types of saving accounts (you can adjust the name and purpose as per your need)

• Everyday Transaction Account: As the name suggests, you can use this account for your day-to-day transactions. For eg: buying groceries, paying out for lunch, buying tickets, etc. I highly suggest you have a debit card and mobile banking linked to this account and make the maximum utilization of the cashback and reward points. Do occasionally check the schemes and services provided by your bank. Personally, I make most of my day-to-day transactions via mobile banking and save money. This is one of my favourite things to do!
• Goal Saving Account: While creating your financial plan, you might have created a saving goal where you decided to deposit a fixed amount every month. So this account should be your saving priority. No matter what, you need to stick to your actual plan and deposit that fixed amount. I advise you not to link your mobile banking and debit card to this account. You should not be using money from this account except for its actual purpose. If you want, you can have an internet banking facility linked to this account and check the growth on an occasional basis. But do not be tempted to use the money from this account. Additionally, I encourage you to transfer your monthly goal-saving amount to this account as soon as you receive your salary (if possible the same day or else the very next day).
• Emergency Saving Account: This account will be for managing your unexpected expenses like repairing bikes, phones, medical expenses, etc. While creating your financial plan, it’s important to create an account to manage your emergency expenses. While you might not use this money every month, there might be cases where you need more money than the allocated money for the month. So, it’s always important to plan for your future uncertainties. This will actually make you value the importance of financial planning. For this account, I do not suggest you link your mobile and debit card to this account. Because a lot of time, we might consider irrelevant situations as an emergency case and might be enticed to use the money from this account. For eg: Once I wanted to buy expensive shoes but had only Rs. 4000 in my everyday account and wanted to use my emergency savings. However, since the only way I could withdraw the money from that account was by encashing it from the bank, which was a long process that I had to let go of the shoes. At that time, I was annoyed for not being able to purchase that shoe, but later on, I thanked myself for setting my account in such a way that my spending was not driven by my emotions. Linking mobile banking and debit cards might sound like a small decision, but it does affect our spending habits and financial goals.

Additional Saving Accounts

If you have additional requirements, I highly recommend you to create separate accounts as per your necessities. For eg: Travel Account, Investment Account, etc. A smart financial plan includes managing your future investments and expenses. So, to keep that on track, we need to plan for our expenses beforehand. So, allocate your budget for future purchases of IPO, stock, assets, or travel expenses. I myself have a separate travel account to manage my travel budget. Travelling has always been an important part of my life hence why I have an account to plan for my future trips. Similarly, your priority might be different from mine. So plan your savings accordingly. For instance, you might want to create an account for your children’s education, for your marriage and retirements, etc. Again, I suggest you not link the credit card or mobile banking with this account.

Saving money can be overwhelming, especially when you are starting. However, with some careful financial planning, you can maximize your savings and reach those goals. Thus, be clear about the purpose of your saving and be persistent towards the goal.

Some tips to increase your savings:

Automate Your Savings: Check this facility with your employer. If it’s possible ask them to direct deposit your salary to the respective accounts. If not, you can transfer the funds by yourself. As soon as the salary is credited to your account, first payout your fixed expenses and transfer the planned funds to the respective account on the same day (or by the following day).

Negotiate using Cash: My mom has been doing this throughout her life. But I considered this tip when I watched a video of Mark Cuban. And trust me, I have been using this tip for the past couple of years and I actually consider this to be very useful. Ask for discounts and try to negotiate the price. Believe me, 70% of the time you’ll succeed and there is nothing wrong with asking for discounts. 

Use the 24-Hour Rule: Avoid purchasing expensive or unnecessary products on impulse with a self-imposed 24-hour rule. Don’t let your emotions make financial decisions. For any non-essential purchase wait for 24 hours. 

Do not carry a lot of cash and use online payment or credit cards for purchase: Spending cash is not only difficult to track our expenses, but also is the factor for the increase in spendings. If we have cash in our pocket, we are more likely to purchase things that we don’t need. Hence, try to be as cashless as possible. Also, these days we have a lot of cashback and reward points for using credit cards and online payment platforms. So, rather use these mediums to purchase things. This will help you to track your spendings and save a few bucks.

Keep a change Jar: This is from my personal experience. We usually consider coins as a hassle and are very careless with them. But remember our early childhood days, where we used to save those coins and purchase our favourite things? Exactly! We can still do that if we are determined and conscious about not throwing the coins around. I bought one of my favourite things out of those changes that I saved for almost a year. Can you believe that?

Happy Savings!!!