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What is the first thing that you must do in order to achieve your personal financial targets? In most cases, it is best to start with a new savings account. Financial management gurus emphasize the importance of taking a tight rein on both ends of your finance spectrum. You need to establish a realistic budget and manage your outflows and set up an emergency fund. In most cases, you will have a high yielding savings account as your emergency fund.

It is essential that you treat this emergency fund as money that you can afford to put away. You have to remember that you are not motivated by high rates of return when you set up your savings account. Your main goal in setting up your savings account is to have a standby fund which you can draw from during the “rainy days.” There are other investment options which can give you the same benefits as that of savings accounts. However, the latter is tops when it comes to ease of use and flexibility.

But this is not the only reason why you are going to set up your savings account. There is more to it than meets the eye. In fact, you can adopt a more progressive approach in as far your saving portfolio is concerned. First, you may come up with three different and distinct savings accounts. You can have different saving accounts for each of the following purposes:

o Funds for emergency situations

o Funds for short to medium-term investments

o Funds for a long-term (loftier) goal

While each of these saving accounts has distinct purpose, they share something in common. All of these savings accounts contain funds which are not meant to be used anytime soon unless something really serious comes up. On top of this, you have to be satisfied with the modest yields that you will get in return for the security that saving accounts provide for your money.

This paradigm shift will bring you out of the usual mindset of looking at IRAs, 401(k) and stock investment to maximize returns of your investment. There is one thing that we want to avoid – higher risk. With savings account, you are able to manage the risks much better compared to high yielding investment instruments. High yield investment options do have the potential in delivering windfall profits. However, you can also lose your shirt if the stock market suddenly makes a nosedive, notwithstanding the careful and comprehensive financial planning that you perform before making your decision. When going for savings account, you have to be aware of the fact that your primary concern is to put in your money in a financial vehicle that is relatively more secure and stable. It is your veritable security blanket which you can rely on anytime.

Most Canadians, particularly those who belong to the under 50 age bracket, follow the same spending behavior as that of the Americans. In a recent financial study sponsored by Mackenzie Investments, results show that over 32% of respondents under age 50 exhibited overspending tendencies, while 24% were categorized as absolute of over spenders. One of the glaring revelations of the study was the tendency of more than half of the respondents (53%) actually resort to their credit cards to purchase items every time they don’t have enough cash on hand or money in their savings account.

The results of the study show that Canadians have the general tendency to “spend first and ask questions later.” It is for this reason why there is a need for us to overhaul our spending behavior and go the extra mile to improve our savings portfolio.


Source by Laurel R. Lindsay

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