Saving up money is hard and certain mistakes could stop you from reaching your savings goal as quickly. Below are just a few savings mistakes to avoid.
Skipping contributions
Saving up money requires making regular contributions – either every month or every week. Every time you skip a monthly or weekly contribution, you extend the time that it will take you to reach your savings goal. For instance, if you’re saving up for a new car, that’s one more month you’ll have to go without a new car.
By setting up a standing order you can ensure that your money is automatically contributed each month. It’s worth contributing this money straight after payday so that you don’t have a chance to spend it (you could even ask your employer to pay it straight into your savings account).
Dipping into it for other purposes
You can also stunt the growth of your savings by constantly dipping into your account for unnecessary expenses. This could include paying for new clothes or a takeaway meal using money that you’ve been saving up for a holiday.
Make sure that you have a clear purpose to your savings – whether it’s a deposit on a house or a rainy day fund – and stick to this purpose. Don’t dip into your savings unless it’s an absolute emergency. You could even consider looking for an account that has withdrawal penalties.
Not shopping around for better interest rates
You can grow your savings faster by putting them in a high interest account. Interest rates may change over time. Subsequently, an account that once has an interest rate of 1.5% may one day change to 0.5%. You’ll usually receive a warning when this happens. At this point, you should take the time to shop around for savings interest deals.
You don’t want to keep putting money into an account that’s earning you very little interest. By constantly switching to whichever account has the best interest rate, you can build your savings at a much faster rate.
Not considering other investment options
A high interest account isn’t the only way to make a return on your savings. In fact, there are many other investment options that can make you a much bigger return.
For instance, you could make a 10% return on your savings by investing in stocks. Alternatively, you could use a platform like MetaTrader 5 and start investing in forex, which could also make you a 10% return in a year. Such investment options are more risky, but you could make much bigger earnings on your savings.
Failing to declare tax on earnings
Some savings accounts are tax-free. Others are not – this means that any money you earn through interest can be taxed. Income earned through stocks and forex is also taxable.
Not paying tax on this income is illegal, so make sure that you’re making a record of it and including it in a tax return each year.
