Ask any financial expert what the ideal age is to start saving money and you’re likely to get the same response: “now.” Even at an entry-level salary, it is critical to start 2016 on the right foot and begin paving the way to financial freedom by setting aside money for short–term needs such as a vacation or an emergency, or longer-term goals like retirement.
“Having a savings strategy is crucial to a person’s overall financial well-being,” says Diane Morais, chief executive officer and president of Ally Bank, member FDIC. “There are simple steps Millennials can take to ensure that they are not only saving, but maximizing the earnings potential of their nest eggs.”
When it comes to designing a savings plan, Millennials should consider the following tips.
Choose Your Bank Wisely
Look for a savings account that doesn’t require a minimum deposit to open, doesn’t charge monthly maintenance fees, offers a competitive interest rate, and ideally, compounds interest daily. These features will help your money grow faster.
Your bank should offer both checking and savings products, since having one bank with both types of accounts makes it easier to transfer funds from one account to another depending on your immediate circumstances. For example, Ally Bank’s Money Market and Interest Checking accounts are interest-bearing, charge no monthly maintenance fees and come with free debit cards and checks.
Pay Yourself First
A lot of people think saving is about putting away money that is left over after other expenditures. To build savings consistently and faster, treat savings as a mandatory expense in your overall budget.
Consider opening an online account to “automate” saving money and take advantage of rates that tend to be more competitive than their brick-and-mortar counterparts.
Once you’ve found a bank with no maintenance fees or minimum deposit requirements, you can establish separate accounts for your special goals. Some banks will even allow you to assign nicknames to these accounts, such as “new car” or “vacation fund”.
Tracking your money on-the-go can make you more aware of your spending and saving habits. One iPhone app option is Ally Bank’s “Ally Assist,” a voice activated assistant that responds to inquiries, and analyzes savings and spending patterns.
The benefits of online banking include bill pay, click-to-chat assistance, online transfers and the ability to access your accounts anywhere and anytime.
Think Retirement Now
Beginning to save at a young age is essential to ensure a comfortable retirement. It’s important to choose the IRA that is right for your circumstances. Traditional IRAs may give investors a tax deduction for the year the contribution is made, while a Roth IRA offers tax-free growth, meaning you owe no tax when you make withdrawals in retirement.
While you may feel the pinch now by putting some of your hard-earned money away, developing good savings habits while you’re young will pay big rewards over the long term, helping you enjoy a more comfortable lifestyle.