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Savings can provide a safety net, but your financial habits could result in your having to dip in and drain the funds. Find out more.
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Having extra money set aside in a savings account can be comforting. You never know when you’ll need to use your funds to cover an unexpected expense, and you’ll feel better knowing you have extra money available. But your everyday spending habits could unintentionally drain your savings if you’re not careful.
Being mindful of your day-to-day financial choices can help you avoid depleting the savings account you worked hard to build. Here are a few ways you might be emptying your account without realizing it.
1. Spending more than you make
A common way to drain your savings quickly is to overspend. It’s never a good idea to spend more than you make because there’s a risk you’ll use up most or all of the funds in your bank account. If that happens, you may need to move money from your savings account to your checking account to recover or, worse, you may end up with credit card debt.
If you struggle with managing your money, you’re not alone. You can learn better money management habits by following a budget. Using budgeting apps can make it easier to plan for necessary expenses and monitor your spending habits so you only spend what you can afford. You’ll be less likely to need to dip into your savings as you get better at budgeting.
2. Paying unnecessary bank fees
It’s important to monitor your bank account activity regularly. You can review your transactions or check your monthly statements through your bank’s website or mobile app. Doing this allows you to be informed. You may be paying bank fees, like maintenance fees, without being aware. All those extra fees add up and drain your bank account balance.
3. Not replacing the money you took out of savings
The purpose of a savings account is to have extra money available when you need it. But replacing the money you take from your savings account is essential. Otherwise, there may come a time when you have little or no savings left because you use it all up.
The easiest way to avoid this is to save money regularly. You can set up automatic transfers to transfer money from your checking account to your bank account. By saving regularly, you’ll feel less stress when you dip into your savings to cover an unexpected expense.
4. Forgetting to save for non-monthly expenses
In addition to saving for unexpected costs, saving up for the irregular bills you pay is essential. Most of us have monthly expenses like rent and utility bills. But some other non-monthly expenses can creep up and negatively impact your personal finances if you don’t plan property.
Expenses like yearly membership dues, home insurance premiums, property taxes, and vehicle registration and inspection fees may occur less frequently but still need to be paid. If you don’t set aside extra money throughout the year to cover these expenses, you may have to dip into your emergency fund, which could quickly deplete your savings.
You can avoid this by establishing a sinking fund to save for upcoming, expected expenses. By doing this, you’ll be prepared when the next non-monthly bill comes your way, and you won’t have to dip into your other savings accounts. Don’t forget to contribute to this fund regularly.
Do this to help your savings grow
It’s crucial to consider your everyday habits and take steps to avoid pitfalls that could drain your savings. If you’ve been saving, make sure you’re keeping your extra cash in a savings account that earns interest. Otherwise, you’re missing out on free money. Stashing your cash in a high-yield savings account is an excellent way to grow your bank account balance faster.
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