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Keeping extra cash in a savings account is smart, but you may be making mistakes that cost you money. Find out more about some common mistakes to avoid them. [[{“value”:”
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Keeping extra cash in a savings account is a smart way to prepare for future expenses. Whether you’re building an emergency fund; saving for upcoming expected costs like insurance premiums, property taxes, yearly membership fees; or saving for a vacation, make sure you’re not losing money.
Some savers are making costly mistakes. Here are a few savings account mistakes that could result in you earning or saving less money.
1. Ignoring automation tools
Many savers continue to make manual contributions to their savings funds. They will transfer money to their savings account when they see they have extra money in their checking account. This strategy can slow you down as you work to reach your savings goals because it can result in you setting aside less money than you originally hoped.
The best banking apps and websites have built-in automation tools to help you stay on top of your goals. After logging into your online account, you can set up automatic transfers. Automating the savings process will save you time and ensure you commit to a regular savings routine. If you want to save more money in 2024, try this strategy.
2. Failing to replenish savings that were spent
When emergencies happen, a solid emergency fund can save the day. The money in your emergency savings fund is meant to be used when needed. But remember to replenish your savings once you use some or all of the money in your fund.
You need to replenish the cash you used to cover an emergency expense to avoid being put in a difficult situation if another unexpected cost comes your way quickly. If you don’t have savings, you may need to use the money in your checking account, which may have been intended for everyday expenses like rent and groceries.
Even worse, you may have no other option but to rack up an expensive credit card bill, which could put you at risk of accumulating credit card debt. Avoid these stressful scenarios by prioritizing replenishing your savings after you spend the money you had previously saved.
3. Not paying attention to APY
Consider the annual percentage yield (APY) as you explore savings account options. The APY is the return you can expect if you keep your money in the bank for one year. Some savers neglect to compare the APYs offered by various banks.
You may lose money if your savings account has a low APY because you’ll earn less interest. Check out our list of the best high-yield savings accounts to compare current rates.
4. Delaying starting to save
Sometimes, life gets in the way of our goals. But don’t assume your financial state won’t allow you to save. It’s wise to prioritize saving money if that’s one of your goals. The sooner you begin, the better off you’ll be. Even a small amount of money saved makes a difference and gets you closer to your goals. Putting off your savings could harm you in the long run.
Maximize your savings
Your choices may be costing you money without you realizing it. Avoiding the common mistakes mentioned above can allow you to maximize your savings and grow your bank account balance faster. For additional money tips, check out our personal finance resources.
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