2022. New year. New you. A new look at banking? It would be a smart decision.
Now is a great time to review your banking habits and see what you can do to help you reach your financial goals. Here are five facts to know about banking in 2022 and steps you can take to boost your finances in the new year.
1. Your emergency fund is always a top priority
With the COVID-19 pandemic, you may have read more in the past couple of years about the importance of saving money for emergencies than ever before.
This is still important for 2022.
You want to have enough savings to help cover unexpected financial setbacks — ideally enough to cover at least three months of expenses — tucked away in an easy-to-access savings account, says Caroline Wetzel, Vice President of Procyon Partners, a wealth consulting firm in Shelton, Connecticut.
A sufficient savings balance can be useful for more than just financial emergencies. “The pandemic is forcing many people to reframe and reshape their expectations in life,” which has led some to quit their jobs to pursue more fulfilling roles, Wetzel says. “If you plan to be part of ‘The Great Resignation,’ you may need to increase your emergency savings even more, on the order of six months’ worth of money instead of three,” to cover any drop in income. , she says.
Take action: Set up an automated savings transfer from check to savings to build up your bank balance. Make sure your money is working hard for you, earning as much interest as possible. You will often find the best savings rates with high interest online savings accounts.
If your emergency savings account is fully funded with enough cash to cover three to six months’ worth of expenses, consider putting any extra money into investments that have the potential for growth. outrun inflation.
2. Adjusting your budget can help ease the burden of inflation
Inflation rose slightly in the latter part of 2021, so you’ll want to pay attention to that in 2022. You may not be able to control inflation, but adjusting your budget can help ease the burden of the rise. prices and help you avoid savings shortfalls.
Take action: “Now is a good time to take stock of where you’ve spent money over the past year,” Wetzel says. (Online bank and credit card statements are a good place to look.) Review your expenses and prioritize must-haves, which could include groceries, housing costs, and building up your emergency fund . Then consider whether lower-priority spending can be reduced at the start of the new year, she says.
If the price of some of your must-haves increases throughout the year, you’ll know you can still afford the things that matter most. Use the extra funds to create (or update) a solid savings plan.
3. It may be easier to avoid overdraft fees
You may have more options for avoiding overdrafts in 2022. At least one major bank has announced the end of overdraft fees in early 2022, and the Consumer Financial Protection Bureau recently announced that it will “strengthen its supervisory and enforcement control of banks”. which are highly dependent on overdraft fees. The bureau could impose huge penalties for illegal overdraft practices.
Take action: If you’ve been hit with overdraft fees in the past, consider switching to an institution that makes it easy for you to avoid these fees.
4. Another institution might be a better fit
Since the start of the pandemic, many people are evaluating what’s important to them, Wetzel says. For some, that might mean deciding whether the banks they do business with align with their values.
According to a recent NerdWallet survey, 78% of banking customers say having an ethical or socially responsible primary bank is very or somewhat important. The survey of more than 2,000 American adults was commissioned by NerdWallet and conducted online by The Harris Poll.
This finding suggests that ethical or social issues such as racial equity, environmental impact, and community impact are important to consumers when choosing who to do business with.
Take action: If your current bank does not reflect your values, consider choose a new institution it makes.
5. Your child could use a new banking app
Banks and financial institutions have rolled out banking apps specifically for kids and teens, and if your child hasn’t already signed up, these apps are worth checking out in 2022. Banking apps can help kids develop their financial literacy, says Clark Kendall, president and CEO of Kendall Capital, a wealth management firm in Rockville, Maryland. “Giving kids a budget and the responsibility to make certain purchases — like their own clothes or shoes — helps them better prepare them to manage their own money in the future,” he says.
Take action: Ask your child to download a child-focused banking app learn to spend and save. Parents can transfer money electronically through many apps and help kids set savings goals. When kids see their own bank balances increase, it can help them decide whether to splurge on a trendy purchase, Kendall says.
With the new year comes the opportunity to chart the course and get in financial shape. In 2022, that could mean budgeting and investing to fight inflation or finding a new banking house, whether for a better savings rate, lower overdraft fees, or more personal alignment with your values.
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Margarette Burnette writes for NerdWallet. Email: [email protected] Twitter: @Margarette.
The article 5 Banking Facts to Fortify Your Finances in 2022 originally appeared on NerdWallet.
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