Are your savings a little wimpy? Maybe you are working as hard as possible only to see a small trickle of funds to reach your savings account. Don’t despair, there are ways to beef up your bucks without getting a second job.
Building long term wealth can give you the freedom to live life while your money does the heavy lifting, and it all starts with investing. Instead of letting your savings sit around and gather dust, you can put your money to work. Your money can earn savings account interest and start to grow some muscle.
As the name implies, a high-interest savings account is a savings account that attracts a relatively high rate of savings account interest.
This rate will generally beat the inflation so you’re not losing out your savings to inflation.
Although the rate of return is not as high as stocks or bonds, at least your money is safe and beating the inflation. That’s a smart move!
These accounts differ from a regular account in a few key areas, mostly when it comes to using the account to make transactions.
Whilst a regular bank account will allow you to make many transactions a month, a savings account will have many restrictions. Limiting the number of transactions a month.
These accounts are focused on one thing, strengthening your savings.
From little things, big things grow
Paul Kelly wasn’t talking about savings account interest, but his words still ring true. High-Interest rate savings account from Newcastle Permanent Building Society offers a high rate of return and even a small deposit of money can grow noticeably over the course of a year.
Unlike its cousin the term deposit or CD (in the USA), a savings account has no term of maturity, meaning you can leave your money to its own devices and not have to be concerned with the interest rate rolling over or being penalized for withdrawing funds early.
This “set and forget” investment is more flexible than a term deposit, with the very nifty advantage of being able to add more funds anytime you wish, including any savings account interest earned.
Do you remember learning the joys of compound interest in high school? If you were like me and too busy drawing on your textbook, maybe not. Compound interest is essentially interest on interest.
Your initial deposit (principle) earns interest over time, depending on the payout frequency this could be paid to you monthly, quarterly, etc.
If this money earned is added to the principle, the principle itself grows larger earning more interest at the next payout cycle.
Pretty awesome stuff, and if applied to a high-interest savings account, will be like steroids for your money.
Despite the name, a high-interest savings account usually earns a lower rate of interest than many other forms of investment.
Term deposits or CD’s are another slow and steady way to build wealth and have a higher rate of return, however, they lack the flexibility of a savings account.
If you want an even higher rate of return you will need to either increase the principal invested or consider other forms of investment. Like, stocks, bonds, index funds, etc.
Riskier ventures will make your money grow quicker but the risk of losing it becomes very real.
If you have some time left to retire, you can take the risk and get a good return of your savings. My retirement account grew by > 9% in the last 10 years, that is beating the savings account rate by many times.
Risking funds into volatile sectors of the stock exchange is exciting, rewarding and not for the faint of heart.
If your personal wealth is looking anemic there are ways to strengthen it. The fiery crucible of the stock market can make you wealthy, but it can just as sure send you broke.
High-Interest savings account from a reputable financial institution gives your money a place to grow without the risk of it disappearing.
Before investing your cash compare rates and features and, as always, don’t be afraid to negotiate better savings account interest rate, the market is as competitive as ever.
Your money is hard earned and with high-interest savings account you can make your money work for you.
Making It Work for You
Really making it work for you is the key. Sure, you can set up a high-interest savings account, put your extra cash in it, and forget about it, but is that really using this sort of account to its fullest?
The beauty with the high-interest savings account is that there is no lock-in period. There is no deposit, withdrawal, or brokerage fee. The money is yours.
And the account is fully under your control. If you have high-interest savings account attached to an everyday account, then you can (usually) transfer money between those accounts instantly.
Which means you can either have money sitting in your everyday account (doing nothing), or you can have your money sitting in the high-interest savings account, making you money.
Hopefully, it is obvious which account you should have your money sitting it!
Yes, you should be saving.
You should have a regular saving pattern (10% of your income is a really good target), but as well as that, you should also simply keep all of your disposable income in your savings account until you need it in your everyday account!
Get Paid Into Your Savings Account
This simple trick means that your money will spend more time earning interest than if you got paid into your checking account, you must log in to your bank account and transfer it to the high-interest savings account.
Or, you can set up a recurring deposit from your checking to savings account.
It goes straight into your savings account and stays there until you need the money in your everyday account. Then you simply move as much as you need.
Keep your money earning you interest for longer.
It doesn’t seem like much but remembers the compounding factor in all of this. Each little bit, over time, all adds up.
Save Time by Setting Up Scheduled Transfers
Do you have regular expenses which come out of your everyday account? Maybe you pay rent weekly, for example?
Just create a scheduled transfer from your savings account to your checking account a day before your rent or mortgage payment comes out of the checking account.
The money will always be there when it is needed, and you won’t ever have to think about it, and once again, the time your money spends earning interest will be maximized.
No More Wimpy Savings
High-Interest Savings accounts aren’t the be-all and end-all of making your money work for you, but they certainly have an important role in the gaps between receiving some money and spending that money.
And if you aren’t using your savings account this way, perhaps you should begin to.
About the Author: Kate Wilson is an entrepreneur and generalist with a love of all things that give her pause for thought. Always looking for great life hacks and clever tricks to make life better, easier and more fun, Kate writes for pleasure (and occasionally for profit), especially when she has something interesting to say.