Easy ways to bolster your savings

One should save as much as possible to ensure financial stability in the future. However, there is no restriction on how much one should save. However, to systematically calculate and make the most of it, there are certain formulae. The most significant point is to know what unavoidable expenses are and how to maximise savings. 

Ideally, the amount in a savings account should support a living cost of three to six months and more.

Finding Your Target Number

Target number differs from person to person and their financial goal. However, it should be the cost of living for 3-6 months.

To decide on the amount for savings, it is necessary to subtract income tax payable from net income. Then divide the expenses into three parts, i.e., 50/20/30 segments. 

• 50% Fixed – Ideally, 50% of expenses comprise basic needs, including rents, utility bill payments, insurance, groceries, and similar expenses, etc., which are the basic necessities. One can allot 50% of income in this segment. If it exceeds half of the income bracket, lifestyle expenditures must be checked to achieve the savings goal.
• 30% by Boiling down Wants – To maintain a certain lifestyle, individuals spend for certain purposes like having lunch at restaurants, going to the gym, watching movies in a multiplex, etc. To make most of the savings boiling down wants is a good practice.

Although splurging on “wants” is often desired, even then, cutting on these costs can help ensure a good savings amount in the bank.

• 20% Savings – 20% of the total earnings must be categorically invested in long term savings like bonds, mutual funds, stock markets, life insurance, etc. At least, the cost of living for three months should be saved for unforeseen situations and meeting financial goals.

Another strategy to plan savings is to subdivide the cost of living into ten allocations:

1. Food expenses – 10 to 15%
2. Utility cost – 5 to 10%
3. Housing cost – 25%
4. Commutation cost – 10%
5. Medical cost – 5 to 10%
6. Insurance investments – 10 to 25%
7. Savings – 10%
8. Personal/Recreation cost – 10 to 20%
9. Charity – 10%
10. Miscellaneous – 10%

However, the allocations are subjective and vary with individuals. Often individuals fail to exactly estimate the cost of living. Therefore, to get an idea of last three months’ expenditure and respective fields, it is good to check the bank or credit card statement.  

Easy Ways to Grow Your Savings Account

A savings account is a liquid fund to deposit and withdraw money. However, there is a limit on a number of monthly transactions. At any point in time in life, one can plan for savings. Starting cost-cutting and depositing more in a saving account is the thumb rule. 

Apart from that, automating savings can ensure steady and regular growth. On every payday, one can schedule an automatic deduction that goes directly to a savings account. 

Before investing, it is highly advised to check the interest rate and security of the fund. Going for a long time deposit earns higher interest and grows money in savings account faster.  

 What is the Average Savings Account Interest Rate?

The average savings account interest rate is around 0.06%. Annual Percentage Yield is an important factor that doubles interest value with a high-yielding savings account. Therefore, before investment, one should know the terms and conditions well to augment the savings goal.

To have the maximum amount in a savings account, one should start saving early and increase the deposit amount over time. It is difficult to sustain emergency conditions, plan post-retirement expenses, or address medical conditions without enough savings. Almost all leading banks offer types of savings account that fit unique banking needs.