3 small mistakes that could drain your savings

Saving money is a critical aspect of achieving financial security and achieving your long-term goals. But it can be tough to meet your savings goals in a normal economic climate, as everyday expenses can cut into what you’d planned to put away. And, it can be even more difficult in an inflationary economy, like the one we’re experiencing currently.

Right now, a number of factors — including consistent inflation— are having a serious impact on people’s finances. Not only is it more expensive to borrow money, but the higher price of consumer goods means budgets aren’t stretching as far. So if you don’t have a solid savings plan in place, you could be in trouble if an unexpected expense comes up.

But a good savings plan encompasses more than just putting money away each month for emergencies or big purchases. It also means ensuring that your savings aren’t being eroded unnecessarily. And even minor mistakes can drain your savings over time, so it’s important to avoid these types of issues if you can. 

3 small mistakes that could drain your savings 

If you’re trying to keep your savings account balance in check, be sure to avoid these small (but common) mistakes.

Paying unnecessary fees

Every day, many people unknowingly spend money on unnecessary savings account fees, which can add up over time. For example, some savings accounts may have certain fees for maintenance or for having a lower account balance than is required. 

While these fees may seem small, $5 here or $10 there can add up over time and drain your savings — or cut into the interest you’re earning on your money. And, you don’t need to pay these fees anyway. There are plenty of savings accounts, including many top high-yield savings accounts, that come with no fees — and they offer the same great rates that other high-yield savings accounts do.

If you’re unsure whether you’re paying for these types of fees with your current account, check your recent bank statements to identify any charges for maintenance or service. If you find them, consider switching to a no-fee or low-fee high-yield savings account instead. 

Not replenishing your savings 

Life is full of the unexpected. That’s why having an emergency fund is essential — it allows you to avoid dipping into your other funds or borrow money to cover emergency costs, like unexpected medical bills or car repairs. However, one small mistake that many people make is tapping into their savings to cover an unexpected expense and then failing to replenish the money.

If you aren’t replenishing what you’re using from your savings, it can jeopardize your financial stability. It can also eat into the interest you’re earning on your money, further depleting your account balance. To avoid this, treat your savings or emergency fund as a priority and create a plan to replenish it whenever you withdraw from it. Allocate a portion of your monthly budget specifically for this purpose.

You can also set up automatic transfers to your emergency fund and other savings accounts. This way, you won’t forget to contribute, and your savings will grow steadily between the deposits and the interest you’re earning.

Not having separate savings accounts 

Using a single savings account for all your financial goals can lead to confusion regarding your savings goals. And without a specific purpose for the account, it may also be easy to dip into your savings when you need extra cash. Over time, that will deplete the funds in the account, which could cause big issues if an expensive emergency comes up. 

Instead of saving for everything in one account, open separate accounts for different savings purposes — from emergency funds to vacation savings and home improvements. This will make it easier to track your progress on your savings and it will keep you from accidentally using the money for other purposes. 

High-yield savings accounts can be great for this purpose, as they typically offer the highest rates of interest on your money, and there are plenty of options offering over 5% interest on your money right now. 

The bottom line

Avoiding these small mistakes can make a significant difference in your ability to build and maintain a healthy savings account. Whether you’re paying unnecessary fees, failing to replenish savings or using one account for all goals, these minor issues can slowly drain your financial resources over time. But by adopting these strategies and being mindful of your financial decisions, you can protect your savings and move toward a more secure financial future.

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