In uncertain times, it’s not uncommon to let fear get the best of you, especially when it comes to making decisions about your finances. Having smart savings strategies in place can help protect your long-term security and weather life’s temporary ups and downs. Here are five saving moves to help you make the most of your money.
- Always Have an Emergency Fund
Saving for the unexpected is a tried-and-true maneuver that can help you avoid debt sinkholes and build lasting financial well-being. If you don’t have a lot to contribute at first, work toward saving a set amount every paycheck – such as $50 – until you save at least $1,000. Then work toward saving 10% of your income so you can build up to having three months of living expenses.
To make saving second nature, set up automatic payroll transfers to a designated savings account, preferably one that’s not connected to your checking account so you can’t dip into it. Whenever you get a raise, boost your savings contributions.
- Have a Little Cash on Hand During a Disaster
It’s always wise to have some cash in a secure place at home in case of a power outage during a natural disaster such as a flood or hurricane. If ATMs are down temporarily, having about $200 in small bills should tide you over in the short term. But keep the rest in a trusted financial institution.
Storing large amounts of cash at home is risky, because you have no recourse if it’s lost, destroyed or stolen. Keep in mind that your money is safer in a financial institution because it’s insured. The National Credit Union Administration (NCUA) and the Federal Deposit Insurance (FDIC) insures deposits up to $250,000 per accountholder for qualified account types.
Your accounts at SchoolsFirst FCU are federally insured by the National Credit Union Share Insurance Fund, (NCUSIF) an arm of NCUA. Deposits in Individual Retirement Accounts (IRAs) are insured separately up to $250,000. Visit mycreditunion.gov.4 for more information about NCUA Share Insurance Coverage.
- Boost Savings with a Share Certificate
A savvy way to maximize your savings is by opening a share certificate, issued by credit unions. They work like certificates of deposits (CDs) at banks, offering higher yields than regular savings accounts. To earn this higher rate, you commit to keeping your money in the account for a period ranging from 30 days to 60 months. You choose the amount you wish to deposit, and for how long. The longer you keep the money in the account, the higher the annual percentage yield is. Share certificates are insured by the NCUA up to at least $250,000, so your savings are safe.
Share certificates are not for your emergency fund money when you need immediate access, like our share savings or liquid advantage money market accounts. For other money you won’t need for a period of time, consider our share certificates accounts. With a minimum deposit of $500, you can earn with some of the best rates in the nation, making it a great way to save. Learn more about our share certificates.
- Save for Your Retirement
Many people have the opportunity to save money for their future through employer-sponsored retirement savings plans such as a 401(k), 403(b) or 457(b). Employers who offer a 401(k) will usually match your retirement contributions — typically from 2% to 8%. Always try to contribute up to the equivalent of the maximum match, after all, it’s free money you won’t get otherwise. A rule of thumb says you should contribute at least 10% of your paycheck to your retirement savings. If you don’t have an employer-sponsored retirement plan, consider opening a traditional or Roth IRA.
Savings Tip: Employer retirement accounts can offer a variety of investment options, including stocks and stock mutual funds3. Although the stock market can be volatile, history has shown that investing in stocks or stock mutual funds has been a proven way to build wealth over time. According to statistics, stock investing has provided average annual returns of more than 10%, compared to 6% for corporate bonds, 5.5% for Treasury bonds and 3.5% for cash or cash equivalents such as short-term Treasury Bonds.1 Please keep in mind that past performance does not guarantee future results. If you are a school employee, our Retirement Plan Advisors can help you with your 403(b) and 457(b) plans.
- Contribute to an IRA
Don’t have an employer-sponsored retirement plan? If you have earned income, consider opening an individual retirement account (IRA). There are two types available to you: a traditional or Roth IRA. A traditional IRA acts like a savings account with tax breaks because your contributions and earnings grow tax-deferred until you start withdrawals after age 59 ½. Roth contributions are made with after-tax income, and they allow your earnings to grow tax-free if not withdrawn before you turn 59 ½ and the Roth has been funded for at least five years.2
Even if you have a 401(k), you still may be able to contribute to an IRA, although there are income phase outs and restrictions for doing so. Deductions phase out for higher incomes. Keep in mind that an IRA typically offers more investing options than a 401(k) does. While there are penalties from withdrawing from IRAs before you turn 59 ½, you can withdraw the contributions you make to a Roth IRA at any time.
Develop Your Financial Roadmap
We are here to help you with all five savings moves. Ask us about our savings and share certificate accounts. If you’re a school employee, our Retirement Plan Advisors can provide guidance with 403(b) and 457(b) plans. And if you need help investing for your long-term goals, our Financial Advisors can assist you.
Visit schoolsfirstfcu.org/advisors to learn more about our Retirement Plan and Financial Advisors.3
1. The Reality of Investment Risk Source: FINRA4 This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. 3. Securities sold, and advisory services are offered through CUNA Brokerage Services Inc.(CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with SchoolsFirst FCU to make securities available to Members. Not NCUA/NCUSIF/FDIC insured, may lose value, no financial institution guarantee. Not a deposit of any financial institution.
CUNA Brokerage Services Inc. is a registered broker/dealer in all 50 states of the United States of America.
Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or GreenPath Financial Wellness counselor who can help tailor a solution for you.
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