Growing your bank balance sometimes can be as simple as relaxing and letting your money work for you — as long as you have the right tools in place. If you want to build a cash cushion without breaking a sweat, try these three methods.
1. Put your money in a high-yield savings account
The interest rate offered on savings accounts at most brick-and-mortar banks is less than one-tenth of a percent. If you put your funds in a high-yield account, you could earn over 20 times more.
Having $5,000 in an account that earns the average interest rate, for example, makes a few bucks after a year. But if you deposit that same amount into an account that has a 2% annual yield, you would earn nearly $100 more, not counting any extra deposits. Online banks and some credit unions tend to offer accounts with higher rates, and the basic checking and savings accounts generally don’t have monthly fees.
Get started: If you have your existing bank account and routing number handy, along with your Social Security number, you can usually open a savings account at a financial institution’s website in about time it takes to check your news feed. Click the link to apply, then enter your information. In many cases, you can fund the account by electronically transferring money.
It takes no more effort to deposit money into high-rate savings than into a low-yield account, and the difference can be worth hundreds of dollars over time. Use a compound interest calculator to figure out how much you could save with a higher rate.
2. Use ‘set it and forget it’ transfers
Once you have a savings account that earns a good rate, set up an automatic payment plan to make regular deposits. Say you get paid by direct deposit to your checking account every two weeks. If you set up a $40 transfer to savings each pay period, you’ll stash away over $1,000 by this time next year. That’s not counting the additional interest your savings will earn. Bonus: Since the transfer whisks money from checking to savings, the cash won’t be as easily accessible with your debit card, so you may not be as tempted to spend it.
Get started: Log into your checking or savings account online and select the option for bank transfers. You’ll typically choose the amount of the transaction, frequency and length of time. Although the sending and receiving accounts don’t have to be at the same bank, make sure your financial institutions don’t charge transfer fees. Click the confirmation link and you’re done.
3. Earn rewards from checking accounts
A savings account isn’t the only way to boost your balance. Some checking accounts, particularly those at online banks and credit unions, offer rewards — including cash back on purchases, good interest rates and new customer sign-up bonuses — that you can use to score extra money.
Get started: Search online for rewards checking accounts, then check their terms. Some offer cash back for purchases up to a certain amount monthly. Others might require that you make a certain number of debit card transactions — usually around 15 — to get a high rate. This can be OK if the purchases are part of your regular spending budget, but avoid making extra purchases. The sweet spot is an account that matches your current spending activity. So you’re doing nothing new — and getting rewarded for it.
Let your money work hard so you don’t have to. With a little set-up work and the right accounts, you can sit back and watch your money grow.
The article 3 Simple Ways to Boost Your Savings originally appeared on NerdWallet.
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