Using Discipline to Succeed with an Online Savings Account
Using Discipline to Succeed with an Online Savings Account
Most people know that online savings accounts offer safety, security, high interest rates, low fees and a certain convenience that appeals to many consumers. But online savings accounts are just there to hold your money and help it earn interest. They cannot make your efforts to save money successful. Instead, you need to have discipline in order to set up an account that eventually grows to have enough value to meet your future needs.
If you manage to combine some self-discipline with the high interest of an online savings account, you may find financial success. There are several steps that you can take in order to make this happen.
Step 1: Set up automatic deposits. It is not enough to open an online savings account and just leave the initial deposit sitting there collecting interest. You must continue to add to its balance in order to maximize the generous interest rate and compounding interest structure. When you set up an automatic deposit into your savings account from your checking account, you ensure that a regular contribution is made to the account. This contribution is one you likely won't even notice since you don't need to do anything to initiate it each month.
Step 2: Avoid dipping in. When you start removing money from your online savings account in order to indulge in impulse purchases and other non-necessities, you hurt your chances of having a successful savings plan. So try to keep an out of sight, out of mind mentality about your savings account. The less you tap into it, the more it will grow.
Step 3: Plan for taxes. When you earn interest in your online savings account, you eventually need to pay taxes on that interest. If you don't plan ahead for this, then you might need to dip into your online savings account in order to pay the tax bill. Make sure you are setting aside a little extra to accommodate this responsibility so that it doesn't hinder your savings plans. Put the extra savings into your online savings account so that it too can earn interest before it is paid to the IRS.
Step 4: Bump it up. When you get a raise, a bonus, a gift or any new influx of money, put at least 10 percent of it in your online savings account as an extra contribution. Since this is money that you weren't counting on to live and pay the bills, you won't even miss it when you make the deposit.
No matter how much or how little you can afford to save, you can reach your savings goals when you use the above steps. However, like any goal you want to achieve, you must be strong and disciplined in order for it to be successful. Just make sure you keep the big picture in mind and commit yourself to the process.
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