Saving money doesn’t always have to be hard work. Effortlessly increase your funds by depositing money in a savings account from your income or monetary gifts you receive. In exchange for opening an account and giving the financial institution money, your savings will be increased by a certain percentage every year. This percentage is called interest. The longer you leave your savings untouched, the more your money will grow.
Growing Your Money
There are a variety of methods to help you grow your money. Compound interest, the Rule of 72 and attention to detail when reviewing financial institution documents are just a few ways you can easily increase your savings. Don’t lose your hard-earned interest to penalties and financial institution fees. Read the fine print before opening an account and be mindful of fees, charges, penalties, interest limits and variable interest rates. By understanding how interest and savings accounts work, you will be more confident when making decisions about how to manage your money.
Compound Interest
Use interest to your advantage. Simple interest is when interest is only applied to the principal amount. Compound interest is when the interest is calculated on both the principal and any accrued interest from previous periods. This results in higher returns, especially over long periods of time.
The Rule of 72
Want to double your money? Use the “Rule of 72” mathematical formula to find out how long it will take to grow your money. First, divide 72 by your account’s fixed annual interest rate. For example, if your rate is 6 percent, divide 72 by 6. At that rate, it will take 12 years to double your savings. When you think about your financial goals, the Rule of 72 can make a positive impact on your savings over time by helping you make informed decisions.
1. Make savings a priority. Each time you’re paid, put a portion of it toward savings. Saving money is a good habit no matter how much or how little you put away each month.
2. Automate your savings. Most financial institutions allow you to automatically transfer funds online or via mobile apps from deposit to savings accounts.
3. Find money to save. Keep track of everything you spend for a week – you’ll be surprised where the money goes. Adjust your spending habits a little and suddenly, you’re saving.
4. Keep the change. Some retailers or financial institutions allow you to save the difference or “round up” between your expense and the next dollar amount.
5. Cancel extra costs. Check to see if you have any old subscriptions that you’re not using anymore – whether it’s to a gym, magazine, or streaming service that you no longer use. Many services that you may no longer want could be costing you money that you could otherwise save. Be realistic about how much you are using what you pay for each month.
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