Financial Literacy

Savvy About Savings

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Steps to Meeting Your Savings Goals

Achieving your savings goals might seem daunting when you are beginning to take charge of your own finances, but it doesn't have to be. Follow these three steps and it won't seem so hard to make your savings work harder for you.

Step 1: Decide What You're Saving For

Financial goals vary at every stage in life. Perhaps you want to save enough to buy a new computer or a new car. After deciding what it is you are saving for, the next step is to determine how much it will cost to reach your goal and how much you can save each month toward that amount. If the computer costs $2,000 and you can save $200 a month, you know it will take you about 10 months to get there.

The best way to save is to set up a repeating transfer from your checking account to your savings account, or have your employer direct deposit a portion of your paycheck into your savings account. Some banks allow you to set up repeating transfers or direct deposit your savings contribution directly into your online savings account.

Try Discover Bank's Savings Goal Calculator1 to help you figure out how much to save to reach your goals.

Step 2: Decide Where You'll Save

Once you've decided how much to save, you need to find a safe and accessible place to grow your savings. Start by looking for a financial institution insured by the Federal Deposit Insurance Corp. (FDIC).

Until December 31, 2013, the FDIC insures accounts up to $250,000 per depositor at each FDIC-insured bank you use. After December 31, 2013, the insurance coverage is scheduled to return to $100,000 per depositor at each FDIC-insured bank. (Check back for updates.)

If you have more than $250,000 at a single bank you may want to visit the FDIC's EDIE Web site. EDIE, the Electronic Deposit Insurance Estimator, allows you to check the insurance coverage of your money at all of your banks. You can also check out other information about an FDIC-member bank at FDIC's Bank Find Web page.

Step 3: Decide How You'll Save

You can save cash in many different types of accounts, including savings, money markets, certificates of deposit, and individual retirement accounts (IRAs).

But here's the question you should be asking: Are you earning the most you can in your savings or money market accounts? Look at a recent statement for each account you have, and check out the interest rate each account is paying today. Many banks have significantly reduced the rates they pay. If you're earning less than 1% in any of your savings accounts, you may want to see if you can get a better rate elsewhere.

When comparing annual percentage yields (APY) from different financial institutions, take a close look at online banks, and the rates they pay. Online banks generally offer higher rates than brick-and-mortar banks, because online financial institutions have fewer expenses. In addition to paying you a higher APY, online savings accounts offer you easy access to your cash, whether you're investing in a money market account, savings account or in a CD.

Before deciding how you'll save, think carefully about how you'll access your money, what kind of expenses you'll incur tapping into those assets and where you can get the best return. No matter what type of savings account you choose, you should be able to access your cash easily using free electronic funds transfers to and from your primary checking account.

Managing Your Money to Help You Save

Now that you're in college you may have given up that after school job you used to have in high school, or perhaps you just want to make sure you are doing your best to make your money last. Here are a 12 money management tips for college students:

1. Track Where Your Money is Going

Track your spending for two to four weeks to find out where your money is going. Are four trips to Starbucks a week really necessary? Usually, just by tracking expenses, it will be easier to start curbing expenses.

2. Use a Budget to Plan 

The best way to manage your money over the course of a semester is to sit down and map out a budget. List sources of income such as scholarships, loans, money from summer jobs and cash from your parents as well as expenses, such as tuition, books and groceries.

3. Having Fun

If you know you need to buy a new phone or go to concert or a party every week, make room for that in your budget. Entertainment helps stave off burn out, so budgeting for fun can be an important component to your success in school.

4. Be Aware of the Calendar

If you spend too much at the beginning of the semester, you could be tapped out later. Give yourself a spending limit for each week. Stick to it and you won't have to eat macaroni and cheese every day in December.

5. Go Easy with Credit Cards

It is easy to spend beyond your means when you use credit. Use credit cards sparingly. Once you get into the habit of reaching for a credit card for every purchase, it can be hard to stop.

6. Establish Your Own Credit Limit

Just because you have a credit card with a $2,000 credit line doesn't mean you have to spend $2,000. If you know you can only pay back $500 then just spend that. Afraid you'll spend as long as there's room on the card? Call your credit card company and request your credit limit be lowered. Keep at it. Card companies will try boost up your credit lines so you spend more. Tell them "no" each time they try.

7. Be Realistic

You can do what you want, but you can't do everything you want. You're going to have to make some choices. Whatever you choose is going to cost some money.

8. Expect to Make Tradeoffs

If you bust your budget on something you really, really want to do this week, make up for it next week. If you find that you must go out to dinner and a movie one week, spend the money; be satisfied with the decision, and commit to staying home, eating at home and not making any other purchases the following week.

9. Prepare for Upcoming Expenses

Whether it's a road trip with friends or an auto insurance bill, if you know a big expense is coming, start putting some money aside to pay for it.

10. Contact Your Roommate and Plan Ahead

Contact your roommate before the semester starts and divvy up expenses. Chat about who will bring a refrigerator and who will bring a microwave. It will help you avoid duplicating purchases and excess spending, but you'll still have all the conveniences to make college life easier.

11. Spread Out Your Expenses and Look for Bargains

Since most of the big expenses come at the beginning of the school year, try to buy books and other items as you need them to help spread out your expenses. Don't forget to check out prices from online bookstores. They may give you a better deal than the campus bookstore. Buy used books or rent books whenever possible.

12. Don't Hesitate to Get Help when You Need it

Even though it is oftentimes difficult to admit when you're in trouble and need money, it is best to do it sooner than later. The longer you put it off, the worse things get.

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