Saving part of one’s salary is important as it can be used in the near future for security purposes. For instance, in case a problem arises, an individual may use part of this money in solving the problem. Opening a savings account is voluntary to all employees and should be done in the early stages when one is employed. Early savings will give an individual an allowance to have sufficient amount in the future, since savings gain interests. People should therefore embark on saving at an early stage of employment, keep on saving, and should also be disciplined to their goal.
Moreover, there are various strategies in which one can start saving. Traditionally, a person can decide to open a piggy bank, where he or she will be depositing loose change on a daily basis. The total amount collected in this system is then deposited into the savings account after a given interval of time. Continuous depositing of money into the bank’s savings account from the daily contributions can turn tables when one gets to his or her retirement age. The other traditional way is whereby a specific amount of money is put aside after every month. This can be done through a written standing order to the bank, in that one instructs the bank automatically to deduct a certain percentage of his or her salary to be transferred, from the current account to the savings account. This is the most common method that has been used over many years, but the main problem is that it requires one to be disciplined.
Consequently, the reason why it is advisable for a person to save is that, one can grow rich within a very short period. Research reveals that, many millionaires have ever used the system of automatic savings. This was through making some local arrangements with either a bank or the employer. In this type of arrangement, a given amount of money is automatically deducted and transferred into a separate account. The latter stated account may be opened for the purpose of savings. For instance, if a person gets employed at a tender age of 25, he or she can become a millionaire at the age of 65. Being a millionaire is possible in this scenario of starting off the savings at an earlier age. If an individual obeys his routine of saving at least $200 from their bi-weekly pay cheques, the end results of the savings initiative of such specified amount on a bi-weekly basis for 40 years, is that one will end up having $1,000,000, in case the percentage returns on investment is at 7%. The saving plan in this scenario requires one to sacrifice a lot since youths are known to be good spenders than savers. Therefore, for a person to get to this dream, one should be willing to have a savings plan in their twenties.
On the other hand, learning how to save is another important element that should be taught to new employees who have opened their savings account. Coming up with a spending plan is the most important element. A spending plan which is also known as a budget, enables an individual to figure out his or her income, and makes one to know the proportion of income that should be spent. After having such knowledge on income and expenditures, a person will then be in a position of determining whether to reduce his or her expenses or whether an alternative means of generating income should be sought so that a given proportion of income is transferred to savings account.
Besides determining the proportion of salary that should be transferred to savings, a new employee can open three types of savings account, and these are; Emergency savings account, savings account for major purchases and retirement savings account. However, opening three savings accounts may prove to be difficult to an individual. For this reason, it is advisable that an individual should just concentrate on opening a single savings account then grow from there. The latter stated circumstance of using a single savings account, can serve multiple purposes. In this case, a person can operate a single savings account that can be used for retirement or down paying an investment property. The excess amount that can accrue in this account after serving all the other intended purpose can then be used for emergency.
Consequently, some banks can offer free accounts on savings. If the latter is the case, it is advisable that the new employees should take advantage of such ventures as it will cost them nothing. After having many accounts on savings, an individual should then decide on the reasons for opening these accounts and make sure that money is put in each of these accounts. The advantage of having multiple savings for a new employee is that, his or her money will be safe from being spent accidentally, and funds will be available when need arises. Last but not least, one should not restrict themselves from having the savings account from banks or credit unions, but can be in any short term initiative such as term deposits, mutual funds, among other
References
Gallagher, Diana. (2010). Advice about Work and Play. New York: Stone Arch Book
Stein, Alison. (2008). Reality. London: Dog Ear Publishing
Torabi, Farnoosh. (2010). Psych Yourself Rich: Get the Mindset and Discipline You Need to Build Your Financial Life. Washington: FT Press
