Are your bills mounting and you need to find a way to boost your savings? Look no further as nairaCompare takes you through 10 ways to increase savings and actualise your goals of attaining financial freedom.
Whether you’re saving towards a big goal or paying off a debt, you have plenty of options for trimming expenses without feeling like you’re depriving yourself.
According to Forbes, to devise a savings plan, you should start by going over your financial situation and your goals, and then build regular savings contributions into your monthly budget
Questions to ask before opening any type of account
Before embarking on your savings journey, there are questions you need to ask to be sure you are on the right track.
While you’re comparing savings accounts, asking some key questions can make your decision process easier.
Some of the questions you can ask include;
- What is the account’s monthly fee?
- Are there any ways to avoid it?
- What is the maximum number of withdrawals I can make per month, and what is the charge if I exceed this number?
- Is online bill pay free, or is there a charge for this service?
- How can I get help with my account if I need it?
- What are the ways to deposit money into my account?
Online or traditional savings account?
Having decided to open a savings account, the next step would be opting for either online savings or traditional banking.
Yes, both types of savings accounts have benefits and disadvantages.
Over the past few years, online savings accounts have surged in popularity. Features like high-interest rates and convenient deposit and withdrawal options have successfully enticed millions of savers to choose online banks instead of traditional brick-and-mortar savings accounts.
Online savings accounts can be rather appealing for a few reasons. First, they tend to pay significantly higher interest rates than savings accounts offered by traditional financial institutions.
In addition, many online savings accounts offer some type of reimbursement and incentives that traditional banks may not. For instance, with most online savings apps in Nigeria, you can purchase airtime and pay other bills at discounted rates.
Some platforms may also offer free transfers with higher daily transaction limits.
Traditional savings accounts on the other hand offer convenience, which includes ATM access.
Also, because Nigeria is still largely a cash-driven economy, traditional banks are at an advantage when it comes to handling cash deposits.
With an online account, depositing cash can involve an extra step or two.
Also, if you’re having any type of problem with your account, you can walk into a branch and talk to a human.
With traditional banks, it is also easier to combine different types of financial products.
For example, only a few online banks offer savings and checking accounts, auto loans, mortgages, brokerage accounts, insurance products, and credit cards.
In summary, an online savings account is best for people who don’t really care about the convenience factor of traditional banks, and who want to maximize the interest-generating potential of their money.
Traditional banks, on the other hand, are for those who prefer the physical approach to handle their financial transactions.
10 ways to increase your savings
There is a lot that goes into the process of saving money. But beyond just setting money aside every month, how do you ensure that your money is working for you?
Prioritise saving money for emergencies
The first savings assignment for your money should be an emergency fund and this requires discipline.
An emergency fund covers your living expenses in the event of a job loss or other unforeseen circumstances.
While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months’ worth of expenses.
Monitoring your monthly income and expenses
A major step to money success, tracking your monthly expenses can give you an accurate picture of where your money is going and where you’d like it to go instead.
By using a budget, you can accurately account for all the bills you need to pay going forward. Before you start running the numbers, take a minute to list each of your monthly expenses.
Keep a separate savings account
One vital tip to successfully saving your money is to have a dedicated account.
It’s a way to protect yourself from yourself. Another key advantage is that having a designated savings account can make it easier to budget for major expenses during the year such as rent or vacation.
You could also set it up so payments into the savings account are automated. That way, you are assured that you keep to your target.
Yes, saving your money is good, especially when you are using an interest-yielding account. But you should also consider placing some of your emergency savings in mutual funds or bond funds that invest conservatively.
This way, you stand a chance of earning more on your savings than you would by keeping all of it in a traditional or online savings account.
A Mutual Fund is an investment vehicle made up of a pool of funds collected from numerous investors for the purpose of investing in securities such as stocks, bonds, money market instruments, and similar assets.
When the markets are favourable, mutual funds can offer returns in the range of 15% to 18%.
Set savings goals
Having a clear picture of why you want to increase savings.
If you need motivation, set saving targets along with a timeline to make it easier to save.
Eliminate your debt
Saving money and paying off a debt at the same time is considered counterproductive. If you’re trying to save money through budgeting but still carrying a large debt burden, start with the debt.
Once you’re free from paying interest on your debt, that money can easily be put into savings.
Quit your habits
Quitting a habit is not an easy task but when you calculate how much goes into funding it annually, you will see that you are standing in the way of your savings goal.
Cut down on expenses
Other than quitting a habit, by cutting down on your monthly expenditure and redirecting the money accordingly, you increase savings.
You probably don’t need that many streaming subscriptions and all of those power-consuming appliances in your house.
In other cases, you may also consider living in a cheaper apartment especially if you are saving toward a long-term goal.
Perhaps the most important tip to help you boost your savings and increase your money is to learn to budget.
If you’re in control of your budget, you’re in control of your finances. Before you can start saving money every month, you need to come to grips with your cash flow.
This means understanding all of your incoming and outgoing revenue streams, including any debt repayments, monthly bills, and savings contributions.
Tips to guide you through budgeting
Budgeting may sound good but it is not an easy task to achieve.
Here’s how to create a budget so you can increase savings:
Track your finances
Keep track of all of your finances over a 30-day period. This includes all of your income and expenditures.
Income vs expenditure
Compare your monthly income to your monthly expenditures to assess how much you’re currently managing to save, or how much you’re overspending each month.
Assess your progress regularly and make adjustments if necessary. If this seems a little overwhelming, there are plenty of budgeting apps available that can help make sticking to your budget easier.
Annualise Your Spending
By doing an annual assessment of the kind f things you spend money on, you will see more reasons why you should cut back on that habit.
Every Dollar Counts
Saving money is kind of like finding free time. After getting through all the things on your daily to-do list, it can seem hard to find time for yourself. And after paying off all your monthly expenses, it can appear difficult to find money to put away in a savings account.
We find free time – even if only for a few minutes – because it’s necessary. Likewise, it’s worth putting some money aside for savings every month – even if only a few dollars each time – to prepare for the future.