Editor’s note: Feb. 22-28 is Military Saves week and your BBB serving Central, Coastal, Southwest Texas and Permian Basin will have daily posts highlighting ways to save money. While these tips are written with military members and their families in mind, these are valuable savings tips for all consumers.
So, you’ve had your eye on the perfect car. Or maybe it’s your dream house. Or perhaps it’s a ring for that special someone.
Whatever that big purchase you’ve been eying is, the best way to pay for it is by saving up first. Saving with a clear goal in mind is a lot easier than saving money for no other reason than to see the balance on your savings account go up.
Something to think about when setting financial goals is to make them S.M.A.R.T.:
Specific: I want to save for a down payment on a house.
Measurable: I want to save $15,000 for the down payment.
Achievable: I can set aside $78 a week by reducing the amount of times I eat out and canceling my cable subscription.
Realistic: Saving $78 a week is within my budget if I cut back and make some adjustments.
Time bound: If I save $78 a week, I’ll have enough for the down payment in four years.
With a clear goal in mind and a plan for how to achieve that goal in hand, saving for your big purchase will be much easier.
The power of interest
Consider different financial products that can help you accumulate interest on your savings.
Savings account: Available online or through a brick-and-mortar bank or credit union. Allows instant access to your funds, with interest yields of 0.2 percent-2 percent. Make sure the institution is federally insured.
Certificate of Deposit (CD): Available through banks and credit unions, deposits usually start at $500. Interest yields are typically 0.05 percent-1.5 percent. Funds may be unavailable without an interest penalty for a set amount of time. These products are typically federally insured.
U.S. Savings Bonds: Available for as little as $25, these bonds are issued by the U.S. Treasury. Yields are usually 1.5 percent-2 percent. Funds may be accessed after 12 months with interest penalties. The bond typically stops earning interest after 30 years and can be cashed in without a penalty.
Money Market Account: Available through a bank or credit union. Minimum deposits usually start around $250. Yields are typically 0.1 percent-2 percent. These accounts allow immediate access to funds. Make sure to get one that is federally insured.
An important financial product for military personnel serving in a combat zone is the Savings Deposit Program offered through the Department of Defense. An SDP allows you to save up to $10,000 and earn up to 10 percent interest annually while deployed. That kind of interest rate is unheard for civilians, so take advantage of it if you are eligible.