Saving money doesn’t always have to be hard work. Effortlessly increase your funds by depositing money in a savings account from each paycheck or monetary gift you receive. In exchange for opening an account and giving the financial institution money, your savings will be increased by a certain percentage every year. This percentage is called interest. The longer you leave your savings untouched, the more your money will grow.
There are a variety of methods to help you grow your money. Compound interest, the Rule of 72 and attention to detail when reviewing financial institution documents are just a few ways you can easily increase your savings. Don’t lose your hard-earned interest to penalties and financial institution fees. Read the fine print before opening an account and be mindful of fees, charges, penalties, interest limits and variable interest rates. By understanding how interest and savings accounts work, you will be more confident when making decisions about how to manage your money.
Interest can build your wealth for you. For example, if you deposit $100 in a savings account that offers 6 percent interest, by the end of the year your savings will have grown to $106. Compound interest can enhance these savings even more by earning interest on interest. With compound interest, the $106 you have after the first year would earn 6 percent again the next year: $6.36, or a 36-cent increase. Add that to the total, and you would have $112.36. If you leave your money in a 6 percent interest account for 40 years, you’ll have $1,028, over ten times the original amount.
The Rule of 72
Want to double your money? Use the “Rule of 72” mathematical formula to find out how long it will take to grow your money. First, divide 72 by your account’s fixed annual interest rate. For example, if your rate is 6 percent, divide 72 by 6. At that rate, it will take 12 years to double your savings. When you think about your financial goals, the Rule of 72 can make a positive impact on your savings over time by helping you make informed decisions.
5 Tips for Saving
1. Make savings a priority. Each time you’re paid, put a portion of it toward savings. Saving money is a good habit no matter how much or how little you put away each month.
2. Automate your savings. Most financial institutions allow you to automatically transfer funds online or via mobile apps from checking to savings accounts.
3. Find money to save. Keep track of everything you spend for a week – you’ll be surprised where the money goes. Adjust your spending habits a little and suddenly, you’re saving.
4. Keep the change. Some supermarkets have machines that count your coins and give you cash in exchange for a small fee. Gather up your spare change, pour it into the kiosk and see how much your coins add up to. Instead of spending it right away, consider diverting your newfound funds to savings.
5. Cancel extra costs. Check to see if you have any old subscriptions that you’re not using anymore – whether it’s to a gym, magazine, or streaming service that you no longer use. Many services that you may no longer want could cost you hundreds of dollars per year.
For more tips on saving, visit America Saves.