Building Financial Security: How to Grow and Protect Your Savings

Achieving financial freedom is an exciting milestone to reach and opens new doors and opportunities for you and your family. Not being locked down by re-occurring debts like car payments or student loans can bring you a sense of relief and joy in knowing you can now use that money for what you’ve been waiting for – a dream vacation to the West Coast or put a new pool in your backyard.

How do you build financial security to make all these things possible? Read this blog to discover how you can give your finances a boost by creating a strong savings strategy and being honest when answering the following questions.

1. Do You Have a Savings Plan or Just Winging It? 

First things first – if you want to excel in your financial journey, you have to stop living paycheck to paycheck. You’ll never grow your savings by accident; you have to be intentional with your spending habits and work towards the financial goal of setting aside savings first before spending. The practical way to ensure you’re staying on track is to establish a budget. Knowing the exact amount that’s going in and out each month will be an eye-opener for where exactly your money is going – either wasting away or in your wallet. A great solution for making sure you’re prioritizing your savings is to set up automated payments into a savings account, so you don’t even have to worry about spending that money by accident.

2. Is Your Money Working for You – or Sitting in a Low-Interest Savings Account?

As you set up automated savings and begin building your financial stability, a key thing to consider is what type of account to use. Be sure that your money is going into a high-interest savings account, such as a high-yield savings account or certificate. Instead of letting your money sit still and earn nothing, these accounts work for you by accumulating a certain percentage of interest each month. These percentages will vary depending on your financial institution, so be sure to look at a variety of options to know which account will work best for you and your goals.

3. Are Your Savings Goals Clearly Defined?

Dreaming of what you want to do with your money helps you to stay motivated towards reaching your goals because you know what you’re working towards. While dreaming of these things can be fun and exciting, it’s essential that you clearly define each goal into the following:

Short-Term: vacations or home projects

Medium-Term: buying a home or car

Long-Term: retirement

Each of these savings goals are unique because of the importance of the goal and the amount of time it will take to get there. Knowing how your savings goals are categorized can help give you a clearer picture of what practical steps you need to take in order to reach them. One resource you can use is a savings goal calculator that can provide you with the insight to know what to budget for each month to reach the timeline of your goal.

4. How Would a Job Loss, Medical Emergency, or Major Expense Impact Your Financial Stability Today?

This is a key question to ask yourself honestly. Emergencies and change are a part of life, and they often happen when we least expect them. Having a financial plan for these events could not only protect you from stress, but also a financial crisis. Since so many Americans live paycheck to paycheck, it’s no wonder why so many aren’t equipped with the resources they need to pay a medical bill or even replace a flat tire.

One of the primary financial goals you should have, if you haven’t already, is to start growing an emergency fund in an interest-bearing account. Try to save at least up to 3 months’ worth of expenses. This extra money could provide the peace of mind and cushion you need should an unexpected major life event happen.

5. Do You Understand the Difference Between Saving and Investing?

Once you begin to practice strong saving habits and grow your wealth, there are some things you should clearly understand. Investing and saving are not the same thing.

Saving is when you preserve your money for short-term needs or emergencies. You can open a savings account, money market, or certificate at your financial institution. For savings, your risk level is very low, as your principle stays safe. Savings accounts are best for emergency funds, upcoming purchases, and general financial cushion. 

Investing is different than savings because it allows you to grow your money over the long term. While investing and saving share the same goal of building wealth, investing your money is more risky because your money can fluctuate in value depending on varying factors. However, there is a potential for higher returns over time. Investing is best for retirement, building wealth, and longer term goals. Your money can be invested in stocks, bonds, mutual funds, ETFs, real estate, or other avenues of investing.

The big difference? Saving is about protecting your money. Investing is about growing it.

If you want to begin or refine your investment portfolio, don’t hesitate to reach out to one of our Investment Champions.

Build Financial Security with Leaders Credit Union

Are you ready to champion your savings and reach your financial goals? The Financial Champions at Leaders are happy to help you discover what saving strategies can work best for you. Be sure to download our free beginner’s guide to establishing savings for more information for how you can save.

Leaders is federally insured by the NCUA.