About 26% of adults in the United States have no savings set aside for emergencies. While the number seems low, it’s really a staggering amount of adults without extra cash in the bank to fall back on. For college students that already live on a tight budget, a savings account is a must.
Maintaining an emergency fund will help you through those unexpected situations in life like car repairs or medical bills. You never want to rely on high-interest credit cards or payday loans to get you out of financial trouble. Opening a savings account early on not only helps you through potential emergencies, it helps boost short and long-term financial responsibility.
Do You Have Access to an Emergency Fund?
Most college students won’t have access to certificates of deposits or retirement accounts to count on during emergencies. So, investing in a local savings account that is liquid and readily available is your best bet. There are generally no penalties for withdrawing cash from your savings account and you won’t deal with interest rates from using a credit card or quick loan. Come to our credit union to start accumulating money so you can be ready for whatever hardships life brings your way.
How Much Should You Save?
Clearly, the more you save, the more secure you’ll be. Financial experts suggest individuals or families with one breadwinner should save three to nine months’ worth of expenses in case of a job loss or other dire situation. However, saving as little as $500 can make a difference. The amount of money in your emergency fund will largely depend on your comfort level and financial availability.
What Are Your Interest Rate Options?
Interest rates are generally low, but don’t let that discourage you. The main objective of maintaining a savings account is for emergencies. If you want to invest your money in a savings with the highest interest rate possible, you’ll have better luck with a credit union.
Credit unions are more likely to offer better interest rates on savings accounts because they support members rather than shareholders. Mutual funds, CDs, savings bonds and other money options provide better interest rates but also offer less flexibility when it comes to money availability. Your ultimate goal is to have extra cash available.
How Do You Start Saving?
If budgeting or saving large amounts is not a habit of yours, start by saving small amounts. You’ll want to set a goal of how much to accumulate over a specific time frame. Another option is to open a savings account and allowing direct, automatic deposits on a monthly basis. Out of sight, out of mind is the goal here. If you don’t make the transfer yourself, you won’t forget to save and you won’t pay attention to the small amount transferred from your paycheck. Financial institutions offer a variety of options to avoid monthly fees and encourage better saving habits.