How to save is probably one of the most important things you will ever learn professionally. In a world where instant gratification and credit are the norms that guide our lives, it is difficult to take a step back and focus on our savings for the future, a rainy day, an emergency, or even that dream item.

Saving is quite a simple process, but why do we struggle with it? There are so many choices available that it can become challenging. We can choose between savings accounts, savings apps, tax-free savings, and fixed savings. Which is suitable for us and how much should we save?

What are the Benefits of a Savings Account?

Do you often worry about money or how to pay for unforeseen expenses? Savings accounts help us achieve many financial goals and offer many benefits.

Low risk

Savings accounts offer low-risk options for your money. The savings usually accumulate at a low interest rate, p.a.

Easy access to funds

Savings accounts let you access your money as you need it with no waiting periods or withdrawal penalties.

Compound interest income

Over time, compounding interest helps build wealth.

Help you budget

Savings can help you budget by separating your income into different spending or savings pockets.

Financial Security

Savings give you some security in the event of an unanticipated expense, such as a loss of income. They give you peace of mind knowing you have a financial blanket to cover you if the need arises.

Emergency Fund

Life happens, and so do emergencies. An emergency savings fund will cover unforeseen expenses like a major roof repair or medical expenses for which you might not have disposable income.

Help with goals

Saving can help you achieve financial goals such as a deposit for a new house, a new car, major renovations or even an education fund for your children’s tertiary education.

Help teach children to save

Saving can help teach children the value and importance of money and how to use it correctly instead of getting what they want on credit or instantaneously. It allows them to see the value of working for something.

It doesn’t require a substantial initial investment

The misconception is often that a significant amount is needed to start saving. This is not true. A regular monthly contribution can build up to a large sum over time.

What to Look for in a Savings Account

There is such a large variety of savings solutions out there that it is often difficult to decide which one suits you best. Below are features to look for when choosing a savings solution. Most importantly, don’t overcomplicate your decision-making and procrastinate.

Access money whenever you need it

Look for a savings account that allows you to withdraw cash as you need it without withdrawal penalties. Also, double-check when saving, as some savings solutions have a minimum saving period or a savings term before withdrawals can be made, e.g., a fixed deposit saving of 12 months. Check what the savings are for. If it is to build capital for a deposit for a home, you might not need it for several years. In that case, fixed savings could work as they often offer higher interest in exchange for tying your money down.

Low cost

Look for a low-cost savings solution with low or no monthly fees. It might not seem like a lot, but it adds up over time. The interest you earn on the account could be less than the fees. Also, look for charges for transactions.

Safety and security features

Financial security and safety are paramount in today’s digital world, where fraud is commonplace. Look for extra layers of security that will protect your savings, like fingerprint or face ID and a PIN on log-in and randomly generated codes to verify transactions and 3D verification in-app.

Decent rate of return

Look for savings accounts or apps that offer a better rate of return than regular savings solutions that offer very little or no interest. You could lose money in your savings account if inflation is higher than the interest earned. Your money will devalue over time. If you intend to save longer, moving your savings into an investment-type account that promises higher interest might be better.

Savings pockets or wallets

Some savings accounts or apps allow you to sort your savings into different pockets or wallets for various savings purposes, such as a pocket for vacation savings, an emergency fund, and a deposit for a home. These pockets can help with budgeting.

Savings Calculator

This is a beneficial tool that can predict how long it will take to achieve a specific goal or how much is needed to save monthly to achieve a goal over a time frame.

Tax-free savings

Tax-free savings is an initiative that encourages saving without tax implications. There is usually a yearly savings limit set that remains tax-free.

Digital savings charge lower or no fees

Savings apps often charge lower or no fees but offer the same services as regular banks or sometimes even more.

Alternative savings offers

Some savings apps offer savings through alternative solutions similar to investments.

Catalyst app, for example, offers low-cost savings by investing in diversified funds with no penalties or fixed saving periods. Contributions can be once-off or monthly. It has also a savings calculator. This is an excellent long-term savings solution to grow wealth for retirement or any other long-term saving.

Despite there being so many savings options available, it is vital that a savings mindset is cultivated to ensure financial security for professionals and their families.  Speak to a consultant today about starting the path to achieving your financial goals through a savings account.

Please note, the above is for education purposes only and does not constitute advice. You should always contact your deVere advisor for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.