CALGARY, AB, Jan 28, 2014/ Troy Media/ – I think I was eight when I climbed those half dozen cement steps and entered the elaborately carved wooden doors of a small town Alberta bank. I felt important carrying my black Sunday School purse, which was filled with a cheque from my grandmother and some change from my piggy bank.
Opening a savings account is always an auspicious occasion, even if you’re well past the age of graduating from your piggy bank to a chartered bank. But getting your savings to grow beyond ‘piggy-bank’ size is a bigger challenge.
We’ve all heard the financial services mantra: Pay yourself first. But for many people on a low or moderate income, saving money is easier said than done.
That may explain why there are as many saving schemes, clubs, and self-help books as there are weight loss diets. Closely aligned with the ‘piggy bank’ strategy we used as kids are the tried and true ‘stick your cash inside a sock in the dresser drawer’ and ‘put your loose change in a jar beside the fridge’ savings strategies.
The goal of most savings strategies provide you with a pain-free way to create a savings habit. That’s why they usually start out easy. I have a relative who starts saving $1 the first week of January. She puts in $1 more each week of the year. While the plan provides an easy start when she’s starting to establish her yearly spending habit, the downside is that she has to scramble to find $52 she can afford to bank the week after Boxing Day.
Even the chartered banks get in the action with products to make your savings automatic. They include Scotiabank’s ‘Bank the Rest‘ debit card, which rounds up the price of purchases to next $1 or $5 increment and puts the difference into your savings account
Small automatic savings mount up. According to the CIBC, $200 a month earning 2 per cent annually will grow to $2,426 after one year, $7,424 after three years, and $12,625 after five years.
Here are some strategies to grow your savings beyond your piggy bank:
- Choose the saving strategy that works for you, whether that is chucking change into a jar beside fridge, rounding up your purchases, or setting up an automatic payroll deduction.
- Start saving for something specific: It’s a good idea to start with something you can achieve within a few weeks, like a television or a new cell phone. Once you achieve your first savings goal, you may even decide that you prefer the higher bank balance to purchasing the item.
- Set new, larger savings goal as you achieve success with the smaller ones.
Unless you are planning to stick your savings into a sock underneath your mattress until it reaches the roof, you will need to put your savings in the bank. Your local bank or credit union probably offers high interest savings, chequing/savings, tax free savings, and foreign currency savings accounts. Or you may opt for an online account by a provider such as ING Direct.
Pick the Right Bank Account:
- If you are just starting out with savings, or think you made need to take money out your savings account to cover emergencies; opt for a no frills savings daily interest account with no minimum balance requirement. This way you will get interest daily even on your small balances.
- Another savings option worth considering is an online savings account. ING Direct does not require a minimum balances on charge you a monthly service charge on their savings accounts.
- Talk to your banker about opening a tax-free savings account that allows you to save for education, home purchases, or other major purchases.
- If you have a small savings budgets, avoid opening a savings account that penalizes you for having less than $5,000 in savings.
Yes, you can save! Pick your savings strategy and create a saving habit, today.
Jane Harris-Zsovan offers her readers practical money advice for the real world.
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