My longest running savings account is shaped like a large yellow Lego. My parents got it when I was eight years old and from then on any birthday money, Eid tokens, or loose change went straight into the Lego piggy bank (can you call it a piggy bank if it isn’t shaped like a pig?)
For months, my greatest ambition was to use my savings to buy an American girl doll complete with a whole slew of accessories. I had circled my favorite items in their magazine, done my math on a prescription pad, and divided up my money to achieve my grand plans.
It has been a few years since I added to the yellow Lego. Today, I instead have a savings account with a bank, and my ambitions are less concrete than they once were. Maybe you’re in the same boat with no firm money goals for the future but having and understanding the basics of a savings account could be extremely useful to you one day.
The specifics of a savings account vary depending on your bank, but basically, a savings account gives you a safe space to keep your money, while it potentially earns a small amount of interest.
To open a savings account with a bank you might need a minimum balance so do your research. You may also have to pay an annual fee or a monthly charge if your account contains below the specified monetary amount. Most basic savings account have no to a very low minimum balance requirement, but it’s still a good idea make sure to keep an eye out for any fees associated with your bank’s savings account policies.
The idea behind a savings account is that, if you keep money in an account separate from your checking account, you’ll be less likely to spend it. If it’s not accessible through a debit or credit card, you’ll probably have to think twice before using it. However, it can be difficult to justify adding to a savings account, especially as a student or young professional where funds are low.
“I’m not making much as it is, you might think to yourself, “why should I be saving anything?”
There are a few reasons why contributing to a savings account could be a good idea, even if you’re only able to add a sliver to it monthly. Primarily, it’s about getting into the habit of saving as opposed to the actual amount you’re saving.
Putting money aside is one of those delayed gratifications like taking your vitamins or exercising. The short-term gains are less palpable than the eventual long-term ones. These parts of our life can be incredibly frustrating in a time where we are increasingly used to short-term gratification. They are the habits that can be most difficult to jump into but can end up being the most beneficial.
Starting that term paper a few days earlier could save you from pulling a last-minute all-nighter. Going through an extra mile of the treadmill could help you achieve that goal of running a 5k. You’ve got to trust that the momentary pain will be worth it. That’s why, just like with other long-term gains, it’s ideal to ease into the habit of saving as early as possible so as to build it up as a part of your lifestyle, and it’s much easier to save with a savings account.
If you’re having difficulty getting in the habit, one trick to try is the 50-20-30 rule. The idea behind this is that 50% of your income goes into essentials like rent, 20% goes into your savings, and 30% goes towards your more immediate lifestyle expenses. Granted, 20% can be a lot for many, so it’s a matter of figuring out what works best for you. You can also try out automated savings tools that’ll transfer a part of each paycheck to your savings account so you don’t have to see it or think about it.
The present is urgent and scary and it might feel like there’s no point in focusing on the future until you’re where you want to be. But there are steps to getting to where you want to be and adding to a savings account can be one of those. Now I’m no financial advisor so do what you’ve got to get through the day. For me, though, having and using a savings account gives me a little bit of hope for what’s to come. I may not have a clear picture of the future but it’s nice to know that, if I ever do make some plans, I might be able to thank my past self for contributing to them.