5 Most Common Savings Mistakes to Avoid in 2024

According to a study by The Ascent, the typical American has $1,200 in their savings account. That may not be enough to pay their bills if they lose their jobs, but it is a good start on an emergency fund. Given how difficult it can be to build savings, it's no surprise that people sometimes make mistakes. Here are some of the most common.

1. Not having an emergency fund

Having an emergency fund in place can save you hundreds, if not thousands, of dollars. Imagine that you break both an arm and a leg and can't work for six weeks. If you don't have enough saved to cover six weeks' worth of expenses, you may end up using a credit card to get by or even borrowing from a predatory lender.

Let's say you must cover $3,500 in bills over your period of unemployment. You use a credit card with an APR of 21%. Once you're back to work, you begin making a monthly payment of $125 toward the card. If the amount you pay each month never increases, it will take you three years and three months to pay the card off in full. However, in that time, you will have paid more than $1,350 in interest.

Having money in an emergency fund isn't about bragging rights. It's about avoiding interest payments that deplete your checking account.

2. Not tracking spending

This one is easy to fall into. After all, who feels like writing down every cent they spend or taking time to balance their checkbook? When we fail to track our spending, though, it's difficult to know where we stand. And when we don't know where we stand financially, it's nearly impossible to deposit money into savings regularly.

I suspect I know why I did not track spending when I was younger. I didn't want to know when I'd spent enough. I was so busy trying to get by that I didn't want to think about what I should be doing, like planning for retirement, paying down debt, or making sure we had enough money put away to carry us through an emergency.

Tracking spending provides a reality check, reminding us when we need to get back on track and encouraging us when we're moving in the right direction.

3. Paying bank fees

Why pay for something when you don't have to? Some banks (especially those with brick-and-mortar locations) charge savings account holders a monthly fee. The fee size can vary, but typically ranges from $5 to $8.

If you're still paying a monthly maintenance fee on your savings account, it's time to ask your bank to drop it. If it won't, there are a lot of great financial institutions out there, and many won't charge you a cent.

4. Treating savings like a checking account

This one can be tricky. You create a budget, track your spending, and get in the habit of putting money into savings each month. At some point, friends ask you and your partner to share the cost of renting a cabin near wine country. You know there's not enough money in checking to cover the expense, so you pull it from savings.

There's nothing intrinsically wrong with taking money out of your savings account, particularly when it's to cover an emergency or something you've planned for. The problem arises when you use the account to fund the fun things you want to do but can't afford to pay for.

5. Ignoring online banks

We humans are creatures of habit, and one of those habits (for many of us) is banking where we've always banked. Here's the problem with that: It's easy to overlook online banks. Online-only banks aren't weighed down by a ton of overhead, so they can usually offer more competitive rates on deposit accounts, like savings.

What online banks have in common with brick-and-mortar banks and credit unions is FDIC or NCUA insurance. As long as your bank is an FDIC member or your credit union is an NCUA member, your deposits are insured for up to $250,000.

If your savings account is not as plump as you would like it to be, don't be discouraged. Everyone begins somewhere, and if you can just put a few dollars away each month, start there. The trick is to be consistent with whatever amount you can add to the pot.