A Month-By-Month Guide to Expanding Your Savings Account in 2021

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A year like 2020 reminds us of the importance of having a sizable emergency fund. While no one can predict the onset of global pandemics and worldwide economic upheaval, that’s the point of having an emergency fund in the first place.

Read More: 50 Easy Things You Should Do To Save Money

As the calendar rolls into 2021, there are some concrete steps you can take to firm up your emergency fund. Since trying to do everything at once often leads to not doing anything at all, spacing out the steps of your savings plan over the course of the coming year can be a prudent strategy.

Here’s a look at how you can improve your savings game in 2021 without getting overwhelmed. Some of these steps can be taken at any time during the year, but many can be optimized by implementation during the right month of the year. With even just a few of these tips under your belt, you’re sure to amp up your savings by the end of the year.

Last updated: Jan. 5, 2021

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Action step: Set your goals

The first step in any financial plan is to set your goals. January is the perfect time to look back at how you did financially the prior year and set up a road map for success in the new year. Be specific with your goals, and write them down in a place you can see them. This makes it more likely you’ll achieve them.

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Action step: Automate your savings

The best way to save is to make it automatic. If money automatically flows from your paycheck to your savings account, you know for a fact that you’ll hit your monthly savings goal. If left to your own devices, it’s too easy to rationalize why you need that money for something else “just this one time.” Call your bank today and ask how to set up automatic transfers.

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Action step: Shop for a higher-yield savings

Just setting aside money every month for your savings is commendable, as many Americans have no savings at all. However, to truly maximize your savings, shop around for the best yield you can find. While many major banks pay a scant 0.01% APY on savings accounts, plenty of online banks have no-fee accounts paying 0.50% or more. While you won’t get rich at these levels of interest rates, it only makes sense to earn as much as you can.

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Action step: Deposit your tax refund

One great savings strategy is to bank any windfalls that come your way. While a tax refund is not technically a “windfall” — it’s just the amount of tax that you overpaid — it sure can feel like one when you receive a check in April for hundreds or thousands of dollars. If you’ve got a big refund on the way, resist the temptation to spend that money and shovel it right into your savings account.

Did You Know: Here’s the No. 1 Thing Americans Do With Their Tax Refund


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Action step: Diversify your savings

Once you’ve begun building up an emergency fund, consider diversifying your investments. If you get a large refund check in April, for example, it’s entirely possible that your emergency fund could be overstuffed. While you should always keep a good chunk of your emergency funds in a liquid savings account, once that account is large enough, you can add some additional low-risk investments to the mix. For example, U.S. Treasury bills are extremely liquid and backed by the full faith and credit of the U.S. government. If you can get a higher yield on some of these safe, ultra-liquid investments, you can diversify some of your savings away from a plain bank account.

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Action step: Round up and save

One easy trick to boost your savings is to “round up and save.” Whenever you make a purchase, round the amount up to the nearest dollar and place that amount in your savings. For example, if you buy groceries and your bill comes to $121.61, round that up to $122, putting the $0.39 into your savings account. What seems like a meaningless amount at the time can add up rapidly depending on the number of transactions you make. If this sounds overwhelming, there are some mobile apps that can help you make these transactions automatically.

Read More: 50 Terrible Ways To Try and Save Money

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Action step: Revisit your budget

Once you’ve reached the midpoint of the year, it’s a good time to revisit your budget. Depending on your job situation, the general economic climate, your spending patterns and other factors, your budget may already be out of whack. Rather than waiting until the end of the year, it’s good to do a midyear course correction to make sure your budget is still on track. It’s entirely possible your budgetary priorities may have also changed after six months, and that some adjustments are in order — just remember to continually prioritize your savings.

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Action step: Earn interest on your checking account, and bank it

You can’t keep all of your money in a savings account, but that doesn’t mean you should throw away free money. Many banks offer no-fee, interest-bearing checking accounts, so you can earn more money on your day-to-day slush fund. Any interest you earn can be transferred immediately to your savings account. While it’s true that most interest-bearing checking accounts don’t pay a very high APY, if you’re looking to maximize your savings you should try to earn interest any way possible.

Learn More: What’s the Difference Between Checking vs. Savings Accounts?

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Action step: Find sources of passive income

There’s only so much you can squeeze out of trimming expenses, minding your budget and using savings tricks. If you really want to juice your savings account, you’ll need more income. The best way to earn extra income without putting in more hours at the office is to generate passive income. Some examples of passive income are investment income and real estate income, which can be as simple as renting out your extra bedroom on Airbnb.

Read: How To Add Extra Money to Your Budget

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Action step: Increase your savings rate by 1%

As you head into the final quarter of the year, you’ll likely get information on open enrollment from your employer. This is a great time to take a closer look at your retirement account and increase your contribution rate. Ultimately, you’d like to save 10% to 20% of your income, but if you aren’t quite there yet, increase your contribution rate in increments. If you bump up your contributions by 1% per month — or even 1% per year — you likely won’t even notice the difference in your paycheck, but over time, those additional contributions will pay off handsomely.

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Action step: Look for a side gig

November is the perfect time to make a few extra bucks by picking up a side gig. As the calendar moves towards the holidays, there are ample opportunities for seasonal work to earn extra money. You could work a few hours per week in the evening or on weekends at a local retail store, or you could help deliver packages for UPS. You may even be able to find side gigs you could work from your own home, such as an online or telephone customer service representative.

Read More: 22 Side Gigs That Can Make You Richer Than a Full-Time Job

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Action step: Bank your year-end bonus

In addition to a tax refund, the other “windfall” many Americans look forward to is the end-of-year bonus. While it’s certainly tempting to use a bonus for other purposes, if you really want to hit your savings goals, it’s best if you can simply bank it. Rather than relying on a bonus for everyday spending, think of it instead as what it is — “bonus” money. And what should you do with windfalls and bonuses if you want to reach your money goals? Stash them in your savings account.

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