For a fact, we all know that saving is not easy, but from time to time, the need arises to scrape together funds for that big purchase carefully.
Whether a car or a new home, setting up goal-based savings accounts is the best way to pay for your big purchase. However, though setting up a goal-based savings account might be easy, meeting your goal can be pretty tricky.
On that note, here are five of the best practices you need to manage your goal-based savings account properly.
Have An Emergency Fund
One of the problems many savers face when trying to meet their savings goals is those unexpected bills you can’t afford.
For instance, you’re saving up to renovate your garden, suddenly your car breaks down, or someone is rushed to the ER and you’re faced with a large medical bill. You are likely to break your garden savings account to pay for your pressing needs.
This is why you need to set up an emergency fund to protect your savings account.
The typical emergency fund holds three to six months’ earnings. This way, in case you lose your job, you would be able to feed yourself and your family without having to break any of your savings accounts.
Separate Accounts For Each Savings Goal
It’s best to save for your different goals in separate accounts. This way, you don’t spend all your savings on one thing in place of another.
For instance, if all your savings for a new house, car, vacation, and emergency fund are lumped into your savings account. There is a possibility that you spend more on your vacation than your rent. This is also applicable when you are involved with investing platforms like SoFi.
Keeping your savings separate also makes it easier for you to track your progress and know when you’ve hit your goal.
Automatic Savings
If you are the type of person that forgets to save or you overspend you can automate the savings process to ease stress and help you meet your saving goal even if you forget.
To get started you need to liaise with your bank and set up a recurring payment on your account.
This way, without fail, on each billing date, you would make a payment right into your savings account before you have any time to spend it on something else.
Setting Milestones
Savings goals can be daunting at times simply because of the considerable amount you need to save.
Setting milestones for your goal-based savings account is a great idea. You can break your savings into quarters, patting yourself on the back for hitting each milestone.
Rewards are a great form of positive reinforcement, which also applies to meeting your savings goals.
When you set milestones, you celebrate and note huge junctures on the road to completing your savings goals giving yourself the encouragement you need to keep going.
Choosing The Right Savings Account
You can also set up a specific account type for different goals. For significant payments like a college fund, you would want to open a long term savings account that you can’t break until the determined time.
While for your emergency funds you can set up a classic savings account that lets you withdraw whenever the need arises.
Visualize Your Goals
Lastly, always remember why you have chosen to save. Visualize yourself when you have achieved your goal and bought your dream house or you are on a plane to your holiday destination.
You can do this by setting up notifications on your phone to remind you about your goals or placing memoranda all around your home to encourage you to keep going.