There are plenty of things to do with your savings. However, if you're not careful, you might squander your money and end up with nothing in the bank. Most people will agree that it takes discipline to save money. And if you’re moving toward larger goals, improperly managing your finances can delay achievements. But if you learn the right and the wrong ways to manage your savings account, you’ll stay on the right path. Here are seven of the worst possible things to do with your savings.
1. Keep It in a Shoebox
Stashing your cash in a shoebox or under the mattress is one of the worst things to do with your savings. This keeps the money close to you, and you might feel comfortable knowing your cash is within arm’s reach. But when your money is in a shoebox, it's too easily accessible, and it’s not protected from theft or fire. And when your money is kept in the house, you missed the opportunity to earn interest, which can maximize your savings.
2. Rely on a Regular Savings
Keeping all your cash in a regular savings account also keeps your money too accessible. However, some people have good success opening an online high-yield savings account or a certificate of deposit. The cash is safe in the bank; and with these accounts, you’re less likely to withdraw on impulse. Therefore, you’ll keep more of your cash in the account and reach your goals.
3. Forget about It
Opening a savings account is excellent, but if you never put cash in your account, you’ll never grow your funds. Don’t open an account and then forget about it. Aim to put at least 5% or 10% of your earnings into the account after each paycheck. Even if your account grows slowly at first, this habit is a stepping-stone to higher deposits in the future.
4. Dip on a Whim
Another bad habit is dipping into your savings account for non-essential purchases. It's okay to take withdrawals, but you should plan ahead and be reasonable. In other words, if you're walking through the mall and see a purse or an electronic item — even if it’s on sale — don’t immediately run to the bank and get your money. If you do this repeatedly, you’ll never grow your account.
5. Buy Lottery Tickets
I once read a story about a man who blew his savings account buying lottery tickets — hoping to hit it big. Some people do hit the jackpot, but the odds are against you. And if you burn through your savings account buying lottery tickets or gambling at the casino, you’ll end up broke with nothing to show for it.
6. Pay off Someone's Debt
If your child, sibling or friend needs help paying off a debt, you might sympathize with their situation. However, their debt is not your responsibility (unless you cosigned for a loan or credit card). Therefore, emptying your savings account to pay off someone's debt is a lose-lose for both of you. You'll lose a percentage of your life’s savings, and the person loses the opportunity to solve his own financial problems, which is a good life lesson.
7. Pay Bills from the Account
If you have bills automatically drafted from your bank account, you might link these bills to your savings since funds are always in the account. However, unless you plan on replenishing your savings account, this is a bad move. Let's say you have $100 coming out of your savings account each month for bills. By the end of the year, that’s $1,200 drained from your account, which can slow down your savings efforts.
It's only smart to have a savings account, but if you want to grow your account, it's important that you learn the best ways to manage your funds. This can help you save for a house, retirement or meet other financial goals. What are other things you shouldn't do with your savings account?