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Strategies to Save

3 Steps to Make Millennials Better Savers

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Millennials - large

Those who keep abreast with the latest in personal finance news have undoubtedly seen the articles reporting millennials have a savings rate of negative two percent. Yes, negative two percent. The reasons for such an abysmal ability to save includes: student loan debt, credit card debt, immediate gratification, low-incomes, distrust of banks, fear of investing and a myriad of other excuses.

Interestingly, our own study performed in May 2014 actually revealed millennials to be better savers than other generations. In fact, 74.8% of millennials surveyed saved money each month. However, our survey did show 39.5 percent of millennials went overdraft an average of 2.7 times a year (a $101 mistake). Over a third of the generation carried $8,864 in credit card debt.

Short of winning a lottery or reality-show competition, there are no quick fixes to help millennials handle their debt or pay for the fifth out-of-town wedding of the season. However, there are actionable steps to take in order to improve a negative savings rate.

1. Find a Better Bank

The Atlantic’s Bourree Lam notes the millennials generation’s distrust of banks as a reason the 18 to 35-year-olds may have an insufficient savings rate.

 “This is paired with the fact that Millennials are more skeptical than ever of banks—perhaps not surprising for a generation that came of age during the Great Recession and Occupy Wall Street. One study named the financial industry as one least liked by Millennials—with Bank of America and Citigroup being the most hated.”

Well, there’s a pretty simple solution: Ditch. Switch. Save.

First of all, no one should be housing his or her savings account with Bank of America or Citigroup. Those banks offer a whopping 0.01 percent interest rate, effectively making a savings account with these banks an interest-free loan. And let’s not forget about those $35 overdraft fees and $12 fees to move money from savings to checking in the name of “overdraft protection”.

promo-checking-halfInstead, switch to a better bank (or credit union).

Internet-only banks offer interest rates close to one percent. This may sound insignificant, but could be an extra 50 to a couple hundred bucks. A savings account with $10,000 at 0.90 percent would receive an extra $90.41 in a year. $10,000 at 0.01 percent rate would get a whole $1.00.

Internet-only banks also offer real overdraft protection. There is no charge for moving money out of savings to cover an overdraft in checking. And guess what? It doesn’t cost the bank anything to make that transaction for you. So Bank of America is making $12 of pure profit anytime a customer goes overdraft and the bank’s “protection” moves money out of savings to checking for said customer. No wonder BofA makes nearly one million in fees per bank branch.

2. Reduce Credit Card Debt

Balance transfers offer millennials a short cut to paying off debt. By taking interest rates from nearly 20 percent or higher to zero, consumers are saving hundreds to thousands of dollars and shaving years off debt repayment.

Unfortunately, balance transfers scare a lot of people who feel beaten down by the financial system.

Many people don’t want to tangle with getting another credit card or worry about how the bank is going to trap them. Banks do offer these zero percent offers to lure people in and hopefully make money off them, but knowing the playbook gives consumers the ability to use the balance transfer offer without getting whacked with fees or hiked APRs. Those who lack discipline to put a credit card in the freezer and avoid spending shouldn’t do a balance transfer. But those with self-control and a 700+ credit score can drastically reduce their interest rates.

Balance Transfer Q&A

Q: Doesn’t applying for a balance transfer hurts my credit score?
A: Your credit score will take a small dip (typically 5 to 10 points) when you apply for a new credit card. But your credit score isn’t a trophy and should be used to help you get the best financial products. If your score is in the 700s, you can afford a 30-point dip to move your debt to one or multiple cards. You will also see those points return relatively quickly.

Q: Don’t I have to pay a fee?
A: Many cards do have a fee, but this fee is nominal compared to the amount of interest you’d be paying to your bank. There are some no fee balance transfer options, which can be found here.

Q: How do I complete a balance transfer?
A: We have several step-by-step guides (with pictures) on our site. Click here to find them. Be sure to read what to do after you’ve completed a balance transfer as well.

Q: What if one card doesn’t take all my debt?
A: You can try utilizing another balance transfer offer to move all the debt over. $8,850 of debt may take two separate cards.

Millennials paying $250 a month on $8,850 in credit card debt at 18 percent interest will take 4.25 years to pay it off and shell out $3,861 in interest alone.

By utilizing balance transfers, millennials with $8,850 could reduce their interest and fees paid to $560 and pay it off in just over three years. That’s already $3,301 that could go into savings, investing or towards paying down student loan debts.


3. Make Practical Investment Decisions

Financial reports often point to the millennial generation’s hesitation to invest as a byproduct of witnessing the fall out of the Great Recession in 2008. This type of past-negative thinking could cause millennials to stay in the workforce until well passed 65 because they were unable to save enough for retirement.

Retirement may seem a long way off for millennials, but committing to saving and investing early can be the difference between having a million or $50,000 in retirement.

Some companies force millennials into saving by creating an “opt-out” 401(k), which reduces the number of apathetic employees who feel too overwhelmed at the idea of picking investments and just avoid signing up.

Those millennials who keep procrastinating investing should consider simply putting their retirement savings in a target date fund.

A target date fund makes investing for retirement simple. Instead of needing to be hands on to balance an investment portfolio over the years, the target date fund simply transitions from aggressive to moderate to conservative as a person nears retirement.

For example, a 25-year-old who plans to retire around 65 would put all her 401(k) money into a 2055 target date fund (the funds are typically in increments of five years).

Right now, the fund would have the young millennial in a relatively aggressive portfolio with more of a focus on stocks, but as she ages towards retirement it would move from fewer stocks to more bonds and cash. This way, if the market did tank close to 2055, she would have her retirement savings in less volatile investments and not lose as much of her savings.

Millennials who don’t have a 401(k) option with an employer-match can still save for retirement through an IRA. A brokerage company like Vanguard offers a target date fund within an IRA. Retirement contributions can also offer tax breaks resulting in a higher tax refund which can either go directly into savings or towards student loan payments and other debts.

Those willing to tolerate a little more risk and with some extra money outside of an emergency savings account should also be investing outside of a 401(k) and IRA as well. Avoid the desire for individual stock picking though and focus on mutual funds and index funds.

Remember: the stock market will take dips. Don’t be overly emotional and resist the urge to start pulling money out any time there is a downturn.

Increase that savings rate

A negative two percent savings rate will cripple the millennial generation’s ability to pay for the next natural phases in life: to buy homes, purchase cars, send the next generation to college and retire. While the generation may focus on less materialistic goods and prefer to sink money into travel and life experiences, those still come with a hefty price tag. It’s time for the men and women in the 18 to 35 bracket to make tough decisions about what they can afford, focus on how to pay down their debt and get over fears of investing in the stock market.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Erin Lowry
Erin Lowry |

Erin Lowry is a writer at MagnifyMoney. You can email Erin at [email protected]

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Strategies to Save

Understanding How Overdraft Protection Works

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Even the most budget-conscious person can overestimate their checking balance and overdraw their account from time to time. Overdraft protection helps you to avoid incurring non-sufficient funds (NSF) fees, which financial institutions could charge when you don’t have enough cash in your account to cover a transaction.

The trouble is institutions have widely varying terms for overdraft protection plans: Some are free; others charge additional fees. Confusing, right? Pay a fee to avoid a fee?

If you don’t grasp fully how it works, you aren’t alone. A survey by The Pew Charitable Trusts found that overdraft protection isn’t widely understood by bank customers. In fact, Pew found that nearly three out of four people who overdraw their account don’t realize that they have the right to have transactions declined without a fee if their account can’t cover the purchase.

Although it has the potential to help, you have to understand the terms of the plans available to you. Let’s take a closer look at the different options.

What is overdraft protection?

An overdraft is when you write a check or make an ATM or debit card transaction for an amount that’s more than the funds available in your checking account. Banks and credit unions typically charge NSF fees when you overdraw your account. Overdraft protection covers the difference if you overdraw your account and prevents you from incurring an NSF fee.

Broadly speaking, three plans are available from financial institutions:

  1. Standard overdraft coverage for individual transactions: The bank will pay the overdraft amount for check, ATM card and debit card transactions. Banks generally charge you for each overdraft transaction, up to a daily limit.
  2. Overdraft protection line of credit: A line of credit will transfer funds to cover the overdrawn amount and any fees charged. The overdrawn amount is subject to a variable interest rate, and each overdraft might incur a separate fee. Note: Some banks might require a minimum annual income for this type of overdraft protection.
  3. Linked account overdraft protection: Your checking account is linked to another account, such as a savings, money market, credit card or second checking account. Your primary checking draws funds from the linked account if you’re overdrawn. However, the transfer of funds might result in an overdraft fee.

In 2010, the Federal Reserve issued a rule regulating overdraft practices that banned banks from enrolling customers in overdraft protection automatically. Now banks must allow customers to opt in and opt out at any time.

Overdraft protection fees

If you opt in, your financial institution might charge a fee to cover check, debit card and ATM overdrafts. This fee typically is a fixed amount that’s charged per overdraft item. These are the fees associated with the three general types of overdraft protection plans detailed above:

  1. Standard one-time overdraft protection: Typically $34 per overdraft, and an additional fee might apply if your account remains overdrawn for a certain length of time.
  2. Overdraft protection line of credit: Typically at least $10 per overdraft and an APR of around 20% charged on the covered amount.
  3. Linked account overdraft protection: Typically $10-$12 per transfer. If you link a credit card account in this way, payments are considered to be cash advances. This means paying an APR of at least 26% or more on the overdraft amount, plus a fee that could be as much as 5% of the overdraft amount.

Although you potentially can be charged an overdraft fee multiple times if you continue to overdraw your account, banks typically limit the number of fees you can be charged in one day. If you refuse overdraft protection, your bank or credit union will decline your transaction, so you won’t be charged an overdraft fee, but you might be charged an NSF fee.

What is the difference between an overdraft and NSF?

If you don’t have overdraft protection when you try to make a purchase without having sufficient funds in your account, the bank or credit union will deny the transaction and charge you the NSF fee. States limit the amount a bank can charge, typically ranging from $20 to $50.

If you don’t have sufficient funds in your account to cover a transaction but you’ve opted in, you avoid paying an NSF fee and the transaction is accepted. You still might be charged an overdraft fee, however. NSF and overdraft fees are somewhat similar, but at the end of the day, they’re different animals.

Is overdraft protection right for me?

It’s difficult for us to recommend a plan that charges fees. Replacing NSF fees with overdraft fees is a poor strategy if you have trouble keeping your checking account balance high enough to cover your expenses.

The sole advantage of overdraft protection is that your transactions aren’t denied. If you have to make an emergency purchase for any reason, it gives you peace of mind—for a price.

For example, say you have a $0 balance in your account but your car has a flat tire. You have your checkbook, so you can pay for the tow and service. In this case, overdraft protection is helpful.

People who live paycheck to paycheck or who have inconsistent income might be tempted to rely on overdraft protection to cover necessary purchases when they might not have the money. However, overdraft fees are an extremely expensive way to cover necessary expenses. A much better strategy is to learn how to make a budget and stick to it.

When it’s smart to pass on overdraft protection

It’s smart to skip overdraft protection if you aren’t good with budgeting, because the service can become a crutch that makes you less likely to pay attention to your spending. Overdraft fees can stack up fast when you’re shopping and you don’t realize you’re overdrawing your checking account.

For example, say your checking account charges a $34 overdraft fee up to four times per day. You’re unaware you have a low $10 balance in your checking account. At the mall, you use your debit card to make three separate purchases: pants for $20, a book for $10 and a coffee for $5. You spent $35 on merchandise while racking up $102 in overdraft fees.

In the example above, it’s obvious that it would’ve been better to opt out of overdraft protection and have your financial institution deny the charges. A better strategy would be to choose an checking account with no overdraft fees, such as the ones below, that don’t let you overdraw your account and don’t charge NSF fees:

  • Aspiration: Aspiration simply doesn’t process transactions when your account has insufficient funds. It has no overdraft protection plan, and the account doesn’t charge NSF fees.
  • Simple: Simple states that its accounts “minimize” overdrafts. Transactions that are more than your account balance typically are “declined or returned.” Best of all, Simple charges neither overdraft fees nor NSF fees.
  • Moven: Like Aspiration, Moven simply declines any transactions that would overdraft your account, resulting in no NSF fees or overdraft fees.

How to avoid overdrawing your account

The tips below provide more strategies to avoid overdrawing your account. They also are best practices when it comes to your financial life:

  • Don’t overspend. You might have trouble managing your spending, which might lead you to overdraw your account. As we noted above, you should learn how to create a budget to get a better picture of your finances and see where you can cut costs to avoid overdrawing your account. It almost goes without saying, but a good rule of thumb is don’t spend more than you can afford.
  • Set up low-balance alerts. Many banks allow you to set alerts when your balance reaches a certain amount. This is a helpful feature that can make you aware when funds run low and when you should minimize spending.
  • Review your account balances. It’s important to keep track of how much money is in your checking account. You can keep a register or log in to online banking to stay up-to-date on your account balance. This way, you know how much you can afford to spend.
  • Don’t write checks before you have the money in your account. You might run into issues if you write checks in advance of having the necessary funds in your account. Although you might expect to have the funds in your account when the check is cashed, things might change and result in you lacking enough funds to cover the check.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Alexandria White
Alexandria White |

Alexandria White is a writer at MagnifyMoney. You can email Alexandria at [email protected]

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Strategies to Save

Best Money Savings Apps

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

best mobile apps

Saving money isn’t always as simple as the oft-prescribed “put it away and don’t touch it” advice makes it seem. With financial concerns constantly tugging at our attention, it can be difficult to find the time and money to save for future goals, events or the unavoidable emergency.

If the savings aren’t there when you need them, you may finance a purchase or cover an emergency with debt like a credit card or personal loan. In a pinch, those tools can be invaluable. But taking on debt should generally be considered a last resort, as carrying debt comes with its own risks.

Luckily for the tech-savvy, the fintech revolution gave rise to several mobile apps designed to help you save money — and make saving a bit more interesting, to boot. Read on to discover the best money savings apps to help you save for short term goals like a vacation, long term goals like a home or college education, and pad your all-too-important emergency fund.

Best money savings apps to help you save daily

Consistency is the root of wealth-building. That said, it follows that saving a little bit of money every single day can be a good practice to start building a wealth mentality. It also happens to be a great way to save money without feeling drastically penalized today to serve your future goals, since you can split your saving into small chunk sand meet targeted saving goals. The following money savings apps can help you get into the habit of saving a little bit of money every day.

Best for saving money on a tight budget: Joy

App Store: 4.3/5, Google Play: n/a
If you’re on a tight budget, the Joy app may be a great way to find money you didn’t think you had.

This free iOS app analyzes your income and spending habits and calculates how much money you can safely save each day without breaking your budget. The Joy app won’t automatically make the transfer for you, so you’ll have to open up the app and decide whether or not to save the money. If you say yes, the funds will be transferred from your linked account to an FDIC-insured Joy savings account.

You can also elect to save more or less than the amount suggested, as you can move money into your Joy savings account anytime. If you need a reminder, set up a daily notification to remind you to make the transfer.

When you’re ready to spend your savings, you can transfer the funds from the Joy savings account to an external account.

Another popular app, Digit, deserves honorable mention. Digit calculates how much you can save each day and will make the transfer for you, automatically — however, Digit costs $2.99, so it may not be a viable option for those on a tight budget.

Best for saving up an emergency fund: Chime Banking

App Store: 4.7/5, Google Play: 4.4/5
Standard financial advice suggests keeping three to six months worth of monthly expenses stashed away in an emergency fund, just in case you run into a financial emergency. In reality, however, around 40% of Americans report they aren’t able to cover a $400 emergency out-of-pocket, while the average U.S. monthly household expenditure is about $5,005.

Chime, a mobile-only bank, hopes its app’s automatic savings features may just help you beat the status quo and make it a little less painful to finally build up your emergency fund. The Chime app is free and available for both iOS and Android devices.

When you enroll in direct deposit and Save When You Get Paid, Chime will automatically transfer 10% of each paycheck into a seperate Chime savings account for you. If you’re enrolled in Chime’s automatic savings program, the bank will also automatically round up each transaction made with your Chime Visa debit card and deposit the amount into your savings account, too.

Best for saving money for a vacation: Tip Yourself

App Store: 4.6/5, Google Play: 4.4/5
Tip Yourself is a free app that may help you save for your dream trip. With the Tip Yourself app, available on iOS and Android devices, you can reward yourself for positive behavior by transferring a little bit of money to your digital tip jar each time you accomplish a personal goal.

If you make it to the gym on a Tuesday, for example, tip yourself $1 (or whatever amount you feel you deserve). The same goes for every other personal goal you may have, such as getting to work earlier or calling your parents once a week.

The app aims to help its users build savings habits and motivate them to stay more consistent about their personal goals, too. The app also has a social feed, so you can share your wins — big and small — with your peers in a supportive community. If you’re into maintaining a streak, there is also a calendar that keeps track of the days you did tip yourself.

With Tip Yourself, you can set a savings goal for your next vacation. When you reach your goal, you’ll feel confident taking a vacation knowing the money you’re spending is your reward for keeping the promises you made to yourself.

Best money savings apps to help you save monthly

Saving money on a monthly basis for large goals doesn’t have to come down to what’s left over at the end of the month. And it won’t, if any of the following money savings apps have anything to do with it. The apps below encourage users to set aside the funds when they have them, before the money is absorbed into their monthly expenses.

Best for saving money for a car: Qapital

App Store: 4.8/5, Google Play: 4.5/5
A car is a fairly large savings goal to meet, but it can seem less daunting if you can save a bit toward your vehicle each time you are reminded why you need the car in the first place — that’s where Qapital comes in.

With Qapital, you can set customizable autosave rules for just about anything, so you can save money simply with the actions you take living your life. You can set a custom rule; for example, you can save a certain amount of money each time you pay for a public transit ticket or fill up the tank for that friend who drives you to work.

Qapital has a bunch of other ways to help you save up for a car, too. With the round up rule, the app will round up all of your transactions and automatically transfer the difference to your designated goal account. So each time you pay for anything, you will have a little bit of money going toward your car. The spend less rule saves whenever you spend less than a certain amount with a retailer or in a certain spending category, and the guilty pleasure rule saves a certain amount whenever you spend on a chosen guilty pleasure, like ordering takeout.

When your goal is funded, you can withdraw the funds and spend it on your chosen vehicle. The free Qapital app is available for both iOS and Android devices.

Best for saving money for a child’s future: Kidfund

App Store: 4.8/5, Google Play: n/a
Whatever your child’s future holds, having the money on hand to help them accomplish their goals will come in handy. With Kidfund, not only can you contribute to your child’s future success, but so can your family, friends and anyone who supports your child’s dreams.

You can open a dedicated savings account for each of your children and set a rule to gift money to your child’s account on a periodic basis. For example, you can gift each of your children’s Kidfund accounts $20 each month. Kidfund awards interest based on the balance within the account.

On top of your giving, you can invite your friends and family members to follow your child’s Kidfund account and they can gift money to the account for birthdays, holidays or whatever reason. When the time comes, you’ll have the money waiting in the Kidfund account to fund your child’s dreams.

Kidfund is a free social savings app available only on iOS devices.

Best for saving money for the holidays: Simple

App Store: 3.8/5, Google Play: 4.2/5
Simple is a mobile-first bank that helps you set aside money for future goals. With a fee-free Simple account, you can set and fund financial goals with a target date. Simple will then calculate how much money you need to transfer periodically to reach your goal by your specified target date, based on the frequency you set.

For example, you can set a goal to save $500 for holiday shopping over 10 months and set the frequency to transfer an amount each month. Simple will automatically set aside $50 each month so you’ll reach your goal for the holidays.

The money for the goal will remain in your Simple account, but will be set aside and tagged for that specific purpose. The amount designated toward the goal will be deducted from your total to give show you how much money is safe for you to spend. The Simple app is free and available on iOS and Android devices.

Best money savings apps to help you save in the long term

Saving for long-term goals can be difficult when you can’t see the tangible results of your efforts just yet. Using one of the money savings apps below may help you keep track of the progress made toward your savings goal, so you can stay motivated as you wait, save and watch the investment you are making towards your future grow with time.

Best for saving money for a house: Rize

App Store: 4.2/5, Google Play: 3.7/5
Rize is a free automatic savings app available for both iOS and Android devices. It helps you earn extra money on your savings for a long-term goal (like a home down payment) and offers a high APY on your cash savings. You also have the option to earn even more on your savings by investing the funds. You set a goal amount and how often you want Rize to pull a specified amount of money from your account, and the app will do the rest of the work for you.

You can set investment or cash savings goals. The money saved in a Rize account earns interest on cash savings. If you choose to invest your money, it’s put into exchange-traded funds which earn varying interest rates.

Rize doesn’t charge any fees on your cash savings or require a minimum amount to open an account; instead, it lets you decide how much you want to pay. If you invest your money, Rize asks you contribute a minimum $2 per month to your account and pay an annual 0.25% management fee of your invested assets.

Rize also has a few built-in features to help you reach your goal a bit faster. It calls the features “Power Ups,” and you can turn them on or off at any time. You can use the Accelerate feature to automatically increase your contribution by 1% each month. So if you are saving $100 toward your down payment this month, Rize will increase your contribution to $101 the next month.

Rize also has a Boost feature that calculates how much extra money you have based on your income and spending habits, and automatically transfers up to $5 to your goal whenever “it makes sense,” which Rize says is about once or twice a week.

Best for saving money for college: Clarity Money

App Store: 4.7/5, Google Play: 4.1/5
Clarity Money is a free automatic budgeting and savings app available for both iOS and Android devices. The app helps you save by setting rules for how often and how much you want Clarity to automatically stash away for goals, like paying for next semester’s tuition or funding your child’s college savings account.

Clarity Money also has a few other features that may help you find more money in your budget to save for school fees. The app can analyze your expenses to find where you may be able to cut back on subscription services and free up some of your funds. Its budgeting features display your spending habits and let you know when you are going over your intended budget in a category, so you can adjust your spending behavior before you overspend. Clarity Money does not charge any fees for its services.

Best for saving money for retirement: Acorns

App Store: 4.7/5, Google Play: 4.3/5
Acorns is an investing app popular for letting its users invest the spare change from their daily transactions with its Acorns Core option. With Acorns Core, the app automatically rounds up your transactions to the nearest dollar and invests the difference into your chosen investment portfolios (once you’ve reached a minimum $5 in roundup savings).

Acorns also has a retirement savings feature called Acorns Later. With Acorns Later, you can invest your money in an Independent Retirement Account (IRA) and set recurring contributions from your linked account. You can invest using a Roth IRA, Traditional IRA or SEP IRA. The ETFs in your investment portfolio will automatically adjust to fit your needs over time based on your retirement date and goals. You can’t have Acorns Later without have Acorns Core, and having both costs the user $2 per month. Acorns Core only is $1 per month.

The Acorns app is free and available for both Android and iOS devices, but the Acorns service costs $1, $2, or $3 (with the Acorns Spend checking account) per month depending on what plan you select.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at [email protected]