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What To Do With Your Savings - The Importance of Savings Understanding the importance of savings is the first step to financial success. Learn what do with your savings with this helpful infographic. what to do with savings, what to do with your savings, importance of savings, savings importance

Prioritize your savings

5 changes to help you save more

Save for an emergency fund. Save for retirement. Save for children’s education. Save for short- and long-term goals. How do you know what to do with your savings? These guidelines can help you make the savings plan that best suits your needs.

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Prioritize your savings

Guidelines to help you build toward your goals

A healthy savings plan starts with a focus

With many competing personal goals, it can be difficult to know where to allocate your savings. This hierarchy from Bank of America can help.

  1. Create an emergency fund
    Most families should strive to have at least 6 months of expenses as an emergency fund in an easily accessible, low-risk regular savings account or money-market savings account.
  2. Pay down high-interest, non-tax-deductible debt
    Paying down credit cards, private student loans and other high-interest debt can help you minimize the interest you pay.
  3. Save for retirement
    Contribute to your employer-sponsored 401(k)—and start as early as you can.

    It pays to start early
    Investor A enrolls in employer-sponsored 401(k) at age 26. Investor B waits until age 36.
    Investor A
    Starts saving now
    Savings at retirement $624,779

    Investor B
    Waits 10 years
    Savings at retirement $421,093

    Assumes 5% annual rate of return compounded once a year at the end of the year.
    Assumes a $35,000 salary starting at age 26 and salary increases of 3% each year with inflation.
    Assumes both investors contribute 6% of their salary at the start of the year and receive a 50% employer match on the first 6% of contribution.
  4. Save for short-term goals
    These fall roughly in a one- to five-year time frame—items such as a down payment for a house, a new car or a dream vacation
  5. Save for your children’s college education
    If you have children, you’ll no doubt want to save for their education—but that shouldn’t come at the expense of your retirement savings. If you are on track to meet your retirement goals, investigate college savings plans.

Choose the savings plan that's best for you

All plans are personal, but considering these alternatives can help you create a strong and customized savings strategy.

Bank of America

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