By Kevin Gibbons
In our book Living the Savvy Life
, our number one Savvy Habit is “Pay Yourself First.” This means to be sure to actively set aside money to save every pay period. If you are doing this, congratulations! You are on your way to financial independence and living well on the money you are making right now.
Sometimes, however, it isn’t always enough to just set up an automatic transfer to a savings account. You need to make sure that you really are saving the money you are setting aside as savings. What does that mean? It means that you have to take a little time to understand how your savings account works.
Ann Carrns wrote in a blog in the New York Times
about how she received a warning that she was making too many withdrawals from her savings account and that this bad behavior could result in her account being closed.
Did you know that federal regulations say you cannot make more than six withdrawals in a month, and that transfers between accounts count towards that maximum number? Ann didn’t. Read her blog to see how she addressed her problem.
Between federal regulations and bank policies, there are many rules to understand when managing your money. It can be challenging to negotiate the many rules and policies, but failing to understand them can cost you money.
In many cases, making a few simple changes, or avoiding a few specific practices can make the difference between seeing your savings grow and seeing it eaten up by fees and penalties.
If sorting through the rules is overwhelming for you, don’t despair. Find a knowledgeable advisor or friend you trust to help explain things to you. As we approach the tax deadline, now is a perfect time to ask for advice from your tax preparer or other financial advisor. In many cases, you can go to the accounts manager at your bank and get the answers you need.
Ann’s experience is just one case of how good intentions can be compromised by an honest misunderstanding. The lesson here is twofold: First, just as you need to actively set aside the money to save, you also need to actively understand how your accounts work, what charges are incurred and why, and what alternatives exist; and second, when you get those e-mails and paper mail notifications from your bank, be sure to read them!