3 Reasons Your Savings Aren't Growing

Your savings should increase over time. If they're not growing, it's time to make a change.

People need different kinds of savings.

Emergency savings cover unplanned financial surprises like home repairs, car breakdowns, and medical bills. Retirement savings fund our golden years. There are savings for different goals along the way, like buying a home or putting kids through college.

Many of us who commit to saving money start small but see our balances grow over time. If that's not happening to you, these factors could be holding you back.

1. You dip into your savings regularly

The purpose of having savings is to avoid debt when our spending exceeds our earnings. Many of us dip into our savings to pay for things like home improvements, vacations, furniture, and appliances. But if your savings aren't growing, you could be withdrawing too liberally.

The next time you're tempted to take money out of your savings account to pay for something avoidable, ask yourself whether you really want to go that route. Is there another option for paying for the item in question?

Picking up a few extra shifts at work, for example, might give you enough money to pay for something you want to buy. That helps prevent another withdrawal that could stunt your savings' growth.

2. You're not earning much interest on your money

The benefit of keeping your money in the bank, as opposed to investing it, is that you don't risk losing part of it to market volatility. The downside, however, is that the interest you earn on your money pales in comparison to the return you might get on a stock-heavy portfolio.

Still, it's a smart idea to have some money in the bank and you should absolutely keep your emergency savings there. But if your savings aren't growing, it could be because you're not taking advantage of higher interest rates.

You'll find more competitive interest rates at online banks than at brick-and-mortar establishments. Be open to the idea of going that route. As of this writing, there are several online banks offering an APY well above 2%, whereas many physical banks still hover around the 1% mark.

Another option: Put some of your savings into a certificate of deposit (CD). Locking your money away for a one-year term could get you closer to a 3% APY. You'll face penalties for tapping your account before its term expires. But you can avoid that by divvying up your cash reserves between a CD and a regular savings account.

3. You're not set up for automatic transfers

Has this ever happened to you? You get into a good flow on the savings front, but then temptations arise. And bills pop up. Suddenly, you've gone from saving every month to hardly saving at all.

If you can't remember the last time you contributed money to savings, it may be time to think about making the process automatic. This way, a portion of each paycheck will land in savings off the bat, removing the temptation to spend it.

Let's be clear: Having any amount of savings is better than having none. But if your savings aren't growing, it's time to examine some of your habits and make a few changes that boost your cash reserves from year to year.