Saving money is a challenge and a half. We get it. The truth is, most of us never feel like we have “extra” cash lying around that we can just hide away in a savings account. So, if you’re wondering how to start, you’ve come to the right place! Let’s help you create a budget and savings plan to help you manage your financial future.
Give Your Money a Job with Savings Buckets
Look at the money you have and give every dollar a single job. The money set aside for your monthly expenses supports you and your family’s daily living. For the rest of your money, you can give them a job to multiply in different savings buckets.
Work Your Money to Get You More Money
Different savings accounts provide different interest rates to help your money grow. Savings bucket examples can be the following:
- Kasasa cash accounts have a 6.1% annual percentage yield (APY) for balances up to $25,000.
- Money market accounts, which require a minimum of $2,000, are best when you need money within a year but still allow minimum withdrawals.
- Term share accounts have fixed rates that let your money mature in short or long-term investments.
- Investment planning with our financial advisors helps you create financial strategies to obtain college tuition, retirement funds, business capital, and other long-term investments.
Remember, a savings bucket should make money work for you. You don’t need to get all kinds of savings accounts to save. Different people require different financial planning for their unique savings goals. One way to choose what savings account is right for you is to determine 1.) how much you can leave money alone to grow and 2.) for how long.
Once you’ve identified the best savings strategy for your current financial situation, it’s time to grow your money and upgrade your savings buckets for bigger returns. Maybe right now, a money market account fits your budget—but as your savings grow, you could move into a term account, letting your funds mature over 18 months for even greater rewards.
Set More Money to Work For You
Set money aside money for bills, groceries, gas, energy bills, utilities, and phones—all your monthly expenses. As you track your spending, you’ll see where the money goes and get a clear picture of what’s left for non-monthly expenses.
Paying closer attention to your spending habits will also help you identify spending that may not be necessary or important. Can you unsubscribe from some of those streaming service apps? Do you actually use that gym membership? Are those impulse buys on Amazon really that important? As you dial this nonessential spending in, your savings will increase.
Consider the following groups of expenses when it comes to savings:
Things You HAVE to Save For
These are non-monthly expenses that you know will occur at some point. Some of them are entirely predictable, and others are not. Examples of both types include:
Predictable Non-Monthly Expenses:
- Annual car registration
- Holiday shopping
- Annual subscriptions
- Debt or loans such as mortgage
- Taxes
Unpredictable Non-Monthly Expenses:
- Car repairs
- Medical and dental bills
- Vet bills
Things You WANT to Save For
Now that you’ve covered the essentials, let’s get down to the fun part! Start by identifying the things you want to save for. Consider starting small, like saving for new clothes or tickets to a show you really want to see. But you can start planning for something exciting like a trip to Paris or a ski vacation in Aspen too. Set up your accounts, and watch the balances grow. Your budget can help you make this happen.
Setting up Each Savings Account
Determining your savings categories will help you budget accordingly so you can track your progress and know where you’re at when you need to access funds to pay a bill or deal with a problem. Consider the following categories to start:
Emergency Fund
Ideally, setting aside three to six months of income in case of a job loss or disaster would be great. But it’s a lot. A $1,000 emergency fund is a great place to start. Once you’ve achieved that, you can level up your game and aim for higher savings to cushion unexpected costs in the future.
If you’re risk-averse, a bigger emergency fund category can give you more peace of mind. If you have large financial responsibilities like kids or a house that needs maintenance or repairs, a bigger emergency fund might make sense.
Health and Medical Savings
Set aside funds to cover copays, uncovered balances, prescriptions, eyeglasses, elective treatments, and other cash outlays that health insurance doesn’t pay in full. Consider a health savings account (HSA) or flexible spending account (FSA). Both are designed to help you cover qualified medical expenses, but they are different.
What is an HSA?
Designed to cover qualified medical expenses, an HSA can either be sponsored by an employer or opened by an individual. To open an HSA, you must:
- Be covered under a qualified high-deductible healthcare plan (HDHP)
- Not be covered by Medicare or any plan that is not a qualified HDHP
- Not be claimed as a dependent
HSA contribution limits for 2024 are $4,150 for single individuals and $8,300 for families.
What is an FSA?
An FSA also allows you to save for medical expenses, but you don’t need to be enrolled in a high deductible plan to qualify. Your employer only has to offer an FSA benefit. The FSA contribution limit for 2024 is $3,200 regardless of whether it’s for an individual or a family.
Car Repair or New Car Savings
This one’s pretty straightforward. If you own an older car that requires regular maintenance, set aside enough to cover expected repairs, oil changes, tires, wiper blades, etc. Consider setting more aside in case a big repair is necessary. There are reliable estimates for annual car repair costs online. You may also consider setting aside funds for a new car down payment if that’s your goal. Calculate the price and decide what you can afford. The larger the down payment, the lower your monthly loan payment will be.
Set Up a Savings Bucket for Each Financial Goal with Canopy Credit Union
While saving funds can me challenging, your money doesn't have to stay in stasis while it's in your savings buckets. You can make your money work for you by growing your wealth in different savings accounts. Different accounts are great for fulfilling different categories of your saving goals
At Canopy Credit Union, we don't just provide the tools to make money work for you—we provide the services to help your money grow and guide the people of Spokane to a place of financial freedom.
Have a question for our Canopy financial coaches? Sign up for a financial coaching session today at canopycu.com/coach.