Five facts to know about banks in 2022 and how they can improve your finances

2022. New year. New you. New look at the bank? It would be a smart move.

Now is a great time to take a fresh look at 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 the steps you can take to boost your finances in the new year.

1. Your emergency fund remains a top priority

With the COVID-19 pandemic, you may have read more over the past two years about the importance of saving money for emergencies than ever before.

It’s still important for 2022.

You want to have enough savings to help cover unforeseen financial setbacks – ideally enough to cover at least three months of expenses – hidden in an easy-to-access savings account, says Caroline Wetzel, vice president of Procyon Partners , a wealth management consulting firm in Shelton, Connecticut.

A sufficient savings balance can be useful for more than just financial emergencies. “The pandemic has caused many people to reframe and reshape their expectations in life,” which has led some to quit their jobs to pursue more fulfilling roles, Wetzel said. “If you are considering being a part of ‘The Great Resignation’, you may need to increase your emergency savings even more, in the order of six months of cash 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 of expenses, consider putting the extra money into investments that have the potential to grow above inflation.

2. Adjusting your budget can help ease the burden of inflation

Inflation rose slightly towards the end of 2021, so you’ll want to pay attention to it in 2022. You may not be able to control inflation, but adjusting your budget can help ease the burden of rising prices. price and help you avoid lack of savings.

Take action: “Now is a good time to take stock of your spending over the past year,” says Wetzel. (Online bank and credit card statements are a good place to look.) Review your spending and prioritize what you need to do, which might include groceries, housing costs, and building your emergency fund. . Next, figure out if lower priority spending can be cut back at the start of the new year, she says.

If the price of some of your essentials goes up throughout the year, you’ll know you can still afford the things that matter most. Use the extra funds to create (or update) a strong savings plan.

Read also : Follow your passion is standard career advice. It can also threaten your financial security.

3. It may be easier to avoid overdraft fees

You may have more options to avoid overdrafts in 2022. At least one major bank has announced an end to overdraft fees in early 2022, and the Consumer Financial Protection Bureau recently announced that it would “tighten its oversight supervision and enforcement of banks, which rely heavily on overdraft fees.The bureau could assess 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 easily avoids these fees.

Related: “It’s a penalty for being poor”: Capital One has reduced overdraft fees. Why not other banks?

4. Another institution might be more suitable

Since the start of the pandemic, many people have assessed what is important to them, Wetzel says. For some, this might include deciding whether the banks they do business with match their values.

According to a recent NerdWallet survey, 78% of banking customers say having a primary bank that is ethical or socially responsible is very or somewhat important. The survey of over 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 fairness, environmental impact, and community impact are important to consumers when choosing who to do business with.

Take action: If your current bank doesn’t reflect your values, consider choosing a new institution that does.

See: The mission of these neobanks is to support under-represented communities

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 signed up yet, these apps are worth checking out in 2022. Banking apps can help kids develop their skills. financials, says Clark Kendall, president and CEO of Kendall Capital, a wealth management firm in Rockville, Maryland. “Giving children a budget and the responsibility for 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: Have your child download a children’s banking app to learn more about spending and saving. Parents can transfer money electronically through many apps and help kids set savings goals. When kids see their own bank balances increasing, it can help them decide if they need to splurge on a fad purchase, Kendall says.

With the New Year comes a chance to chart a course forward and be in good shape financially. In 2022, that could mean budgeting and investing to fight inflation or finding a new bank, whether it’s for a better savings rate, lower overdraft fees, or a more personal alignment with your values.

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Margarette Burnette writes for NerdWallet. Email: [email protected] Twitter: @Margarette.

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