Money-Saving Strategies for Families

How to Make More of Household Savings

May 7, 2009 Wei Yin Wong

Families can maximize their savings by using term deposits, opening variable online savings accounts, diversifying their cash and consolidating their savings.

The current financial climate has left many families struggling to make ends meet. One of the biggest concerns many families face is to maximize their savings for future uses. But with dipping interest rates, many are not sure how to make more of their savings.

Here are some money-saving strategies that are safe and yet have the potential to help money grow.

Invest Savings in Term Deposits

Some people often mistake term deposits as a long-term commitment. They are not necessarily so, as term deposits can be fixed for various durations depending on the depositor’s requirements. Some banks can fix term deposits from as low as seven days up to five years.

By putting money in term deposits, the fixed rates will protect savings against possible lower interest rates in the future. So consider investing savings in a term deposit over a short period of time with a higher fixed interest rate. Another advantage of term deposits is that they allow you to calculate the exact return on maturity. However, do note that rates vary with the terms set and that depositors who access their money before maturity date will forfeit the interest rate fixed earlier.

Opening Variable Online Savings Accounts

If fixed term deposits are too rigid, consider opening variable online savings accounts that allow people to earn competitive variable interest rates and have easy access to their money. It’s an ideal way to put money while waiting for other better investment opportunities to emerge. Variable online savings accounts are usually linked to transaction or day-to-day banking accounts. That’s how depositors can get instant access to their money when necessary.

The interest rates are variable, which means they can go up and down. So depositors will benefit when interest rates increase. Similarly, they will also be affected if rates drop.

Diversify Cash

It’s always wise to diversify cash for more flexibility and security. A good approach is to use both term deposits and variable online savings accounts to maximize savings. So put some money in a term deposit with a fixed and higher rate and some in an online savings account with a variable rate but quick access to money.

Consolidate Savings

Most people have multiple bank accounts, resulting in more fees and other charges. One way to reduce fees is to consolidate savings within a single bank. In fact, it may be a good idea to use only one bank for all finances – savings, loans, mortgages, credit cards, etc. This way, all transfers between accounts can be done instantly with no extra charges. And with online banking, a bank account holder can see the state of his finances with just one view. It’s cost-effective and easy.

There are ways to make more of household savings. Many banks offer products that can help maximize savings. These include fixed term deposits and variable online savings accounts. Families may also want to combine these two approaches and consolidate savings within a single bank to earn more returns and to reduce costs.

Found this article useful? Read also Debt Management for Families, Opening a Joint Bank Account and Choosing Savings Accounts for Children.

References:

Understanding Money Website

Westpac Bank. “7 Ways to Save with Confidence” in Smart Money Moves newsletter. Issue 01, 2009

The copyright of the article Money-Saving Strategies for Families in Family Finances is owned by Wei Yin Wong. Permission to republish Money-Saving Strategies for Families in print or online must be granted by the author in writing.

Money-Saving Strategies for Families