The Update

Savings Strategies for the New Year

It’s a new year, and it’s a wonderful opportunity to increase your savings. Fortunately, as a member of Rio Grande Credit Union, you have so many fabulous ways to save!

Let’s take a look at some of the ways you can save so you can make wise decisions about your savings goals and strategies.

Savings Account

A savings (aka “share”) account offers a secure place to store your funds for short- or long-term financial goals. Most financial institutions offer savings accounts to their members. Generally, they are at no or low cost with easy accessibility and liquidity, making them a great choice for short-term holding and for achieving savings goals, like building an emergency fund.

On the flip side, savings accounts tend to have lower earnings rates when compared to other savings options. So, while they may be a great choice for short-term savings goals, they are not the best place to keep funds you plan to save over a longer period of time.

Share Certificate

A share certificate, also known as a certificate, or savings certificate, is an insured savings account that usually has a fixed dividend rate through a fixed date of maturity (aka “term”). Share certificates offer a low-risk investment with higher dividend rates than typical savings accounts.

The APY on a certificate is locked until its maturity date, protecting it from market slumps.
You’ll need to meet some basic requirements before you can open a certificate, including a minimum opening balance and a commitment to keep your money in the account for the entire term, or pay a penalty for breaking the contract through early withdrawal. 

When opening a certificate, you’ll be given a choice for the maturity term, typically from three months to five years. In general, certificates with longer maturity terms will earn a higher rate, but rate should not be your only point of consideration. Choose a shorter term if you anticipate needing to access the money soon and a longer term if you won’t need these funds for a while.

Dividend-earning Accounts

Consider exploring dividend-earning accounts to take your savings to the next level. These accounts, which include money market accounts or share draft (checking) accounts, offer higher interest rates in exchange for select commitments.

As with share certificates of deposit, you’ll often need to meet an opening requirement and maintain a minimum monthly balance in your dividend-earning account. With dividend-bearing checking accounts, you may have other requirements, like debit card transactions, e-statements and direct deposit for example, to earn your highest dividend rate.

On the plus side, these accounts do offer some liquidity, which can include check-writing capabilities. This makes them a great choice for short-term savings and for housing emergency funds.

Saving Tips

Finally, these tips can help you boost your savings in the new year:

• Set up automatic monthly transfers from your checking account to a savings account so you never forget to feed your savings.
• Set clear goals for both long- and short-term savings. Establish a set amount as well as a specific purchase or expense, such as a vacation, a down payment on a home or a new car.
• Create a timeline for your savings. Review periodically to ensure it’s still working.
• Build an emergency fund with three to six months’ worth of living expenses. This will help you weather unexpected expenses without resorting to debt.

Make this the year you master your savings! Use the tips here to choose the perfect place for your funds and start making your money work harder for you! 

Financial Coaching Available Through RGCU

Do you want to learn more about savings options and finance in general? Contact RGCU's Certified Financial Coaches to setup a 1-on-1 meeting. Our financial coaches can help you understand savings, teach you about credit and responsible