By: National Content Desk — Personal Finance
For many Americans, the COVID-19 pandemic has spurred financial stress and uneasiness. While the future economic landscape remains unclear, Anand Talwar, deposits and consumer strategy executive for Ally, encourages families to continue working towards greater financial stability. In this week’s Q&A roundup, Anand answers some tough questions on how to best save and plan for the road ahead during these uncertain times:
Q: If there’s another stimulus check, what should you do with that money? Pay off debt or save?
Anand: If and when people see another stimulus check, what you do with it depends largely on your own financial situation. For those who can, it may make sense to pay down things with high-interest debt, like some credit cards. For others, they may need to apply much of it toward everyday household needs. The key, however, is to keep your eye on the ball when it comes to savings. History has shown the best way to successfully grow an emergency fund or save for a future expense is to steadily add to savings, even if it’s only in small increments.
Q: With interest rates low, how can you maximize your savings?
Anand: Research shows success is multiplied when you personalize and visualize your goals – whether that is to lose weight, run a 5K, or build savings. Luckily, there are new online tools that make it easier than ever to do that with savings. At Ally Bank, these include smart tools like ‘Buckets’, which let you name your savings priorities, and ‘Surprise Savings’, which analyzes your spending patterns and automatically transfers any extra dollars from your checking account into savings.
Even in today’s climate, our smart savings tools have allowed customers to save over 10 times more than with interest alone.
Q: What is the best way to set realistic savings goals and create a budget to reach those goals – for instance, saving for a wedding, your child’s education or a new home?
Anand: The simplest way to budget is to really begin with any amount. Just getting started is more than half the battle. Once you’ve found success, you will crave more. Here are a few steps to follow:
- Start by assessing how you’re spending money.
- Take a good look at where those dollars are going.
- Reduce or eliminate things that don’t match your newfound priorities.
- And then apply any extra cash toward your goal.
Taking the time to establish realistic, tangible goals and determine what you need to do better and differently is vital. People are most successful when they visualize their savings goals. This can be as simple as writing it down and placing it where you can see it regularly. That reminder will serve as motivation to stick with your plan.
Q: What is the most important savings advice you would give?
Anand: The best advice I can give is to follow these three practices: Make it personal. Make it automatic. Make it incremental. When you clearly identify what you are saving for and give it a name, it’s a lot harder to walk away from it. By automating things like a recurring transfer, you build up your balance without even having to think about it.
Also, size isn’t everything. Even the small amounts add up over time.
One additional tip: be sure to find a bank that cares as much about your priorities as you do and makes your money work smarter by providing a competitive interest rate and removing unnecessary fees, which can cut into savings more than you realize.