4 Small Banking Tweaks Can Have Big Financial Impact, Says Suze Orman
It's tempting to think of your banking accounts as adult versions of your piggy bank, only you don't need a hammer to access your funds. Just like your piggy bank sat on your shelf ticking down the days until you'd saved enough for that new toy, your bank accounts can feel like static entities -- they're just kind of there.
However, unlike your poor piggy bank, you can get more creative and versatile with banking habits. According to Suze Orman, the way you approach banking can be pivotal to your long-term financial well-being. Instead of saving for the grown-up version of a new toy, you can start the process of growing your wealth.
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It's no surprise the personal finance icon has dedicated a lot of time to developing smart habits that help you put banking to its most constructive uses. Read on to learn four ways you could be saving more efficiently to get the most from your money.
1. Keep Different Accounts for Different Purposes
Don't treat your savings account like a melting pot for all your financial needs. As the saying goes, "Too many cooks spoil the broth." Similarly, if you have too many financial necessities competing for funds in one account, you might find yourself caught empty-handed when it's time to pay a bill.
One way Orman has recommended keeping track of savings is by opening different savings accounts for various financial needs, such as accounts dedicated to housing, car payments or medical bills. You can keep a bird's-eye view of the money you have reserved for each expense, and make sure you have what you need without depleting your ability to pay another bill.
2. Focus on Your Emergency Savings
If there's one account that needs constant attention, especially in times of economic uncertainty, it's your emergency fund. Orman emphasizes building a robust emergency savings account -- ideally enough to cover your household expenses for at least a year.
You should also look for ways to grow your emergency fund passively, as many banks offer high-yield savings accounts that accrue interest over time. Unlike long-term savings vehicles like CDs, high-yield savings accounts allow you to access funds without penalties in case of, well, an emergency.
3. Make Sure Your Money Is Federally Insured
Four little letters can offer significant peace of mind when saving in a bank: FDIC. Technically, "Member FDIC," which stands for the Federal Deposit Insurance Corporation. If you're banking with a credit union, look for insurance from the National Credit Union Administration, or NCUA. These designations ensure that up to $250,000 of your deposits are federally protected in the unlikely event that your bank or credit union fails.
"You may have a variety of different types of accounts that fall under one of eight different categories. For each category, you have at least $250,000 of insurance," Orman explained in one blog post on her website SuzeOrman.com. These categories include individual deposit accounts, certain retirement accounts such as IRAs, joint accounts, revocable trust accounts, irrevocable trust accounts, employee benefit plan accounts, corporation/partnership/unincorporated association accounts and government accounts.
However, not all financial institutions carry this insurance, so it's crucial to double-check for those designations.
4. Pay Down Your Credit Card Debt
One of Orman's most consistent pieces of advice for anyone looking to boost their wealth is to pay down their credit card debt. So, what does that have to do with banking? Fortunately, some banks offer financial counseling for members, as well as various tools and educational resources to help you succeed at major financial milestones (including paying down your credit card debt).
Smart banking requires treating your accounts as more than glorified piggy banks. Take Suze Orman's advice: Diversify your accounts, focus on building your emergency savings, ensure your money is federally insured and tackle your credit card debt by using the resources your bank provides.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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