When I asked various Millennials about what personal finance topics to cover this month, several wanted to know how to save for large purchases. They want to pay for a wedding or buying a house or get a new car. So here are 4 tips on how to save for large purchases.
How To Save For Large Purchases Tip #1: Have A Separate Bank Account
Using one bank account for everyday purchases and long-term goals doesn’t mix well, as you can’t easily separate the money. Plus, many people tend to spend more when they see a large amount of available funds.
Hence, you combat these issues by opening a separate bank account. I suggest opening another account at the same bank where you have your current account to make administering both easier. However, some people find they save more money when they open an account with a different bank. Especially if they can’t access that account easily.
If you’re looking for suggestions on where to open your separate bank account, I’m a big fan of online banks with high-interest savings accounts. They not only have free accounts with low to no minimum deposit, but they pay a higher interest rate than brick-and-mortar banks.
To compare online banks and read reviews, I highly suggest you read this NerdWallet article.
Finally, many online savings accounts allow you to create “goals” or “buckets” to save money for different things. Usually you can add names, like “Wedding” or “Vacation 2020.” This really helps segment your money further so you know exactly what you’re saving for!
How To Save For Large Purchases Tip #2: Pay Yourself First
I wrote an article back in January 2020 about how to pay yourself first, so please go and read that article. However, the gist of it is this: If you want to save money, you must do so before you pay your bills. Or you may not save anything at all.
How To Save For Large Purchases Tip #3: Discuss With Your Spouse About Your Financial Goals
This tip is for all the Millennial couples out there. It doesn’t matter if your married or in a long-term relationship, you must talk with your significant other about your financial goals.
You two should dedicate at least 30 minutes of uninterrupted time for this conversation. And you must do this face-to-face. This is not the time to handle such an important topic through a phone call or though text messages.
By having this conversation, both of you can be real about your future goals, and how to utilize your money to achieve them. In addition, you’ll probably discover that both you and your partner have different ideas about how to save or what to save for. This is good! Now you can work together to determine what’s important.
Finally, you and your spouse should have these types of conversations frequently, where you not only talk but review your finances too. The time to be secretive about your money is over! Be open about your finances, the good and the bad.
Tip #4: Make More Money
If, after all the planning and discussions you and your partner discover you two don’t have enough money to save for your large purchase, then it’s time to make more money.
While this tip disheartens some, you must do what you gotta do. Thus, if you need to work overtime at work, do so. If you need to work a part-time job, do it.
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