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3 Ways to Bulk Up Your Savings in 2017

12/21/2016 02:16 pm ET | Updated Dec 21, 2016

By Laura McMullen

Many of us will vow to exercise more in the new year. But why stop there? How about whipping your savings account into shape, too? After all, a savings account isn't just a place to stash money; it can also help you budget smarter and even earn a little interest.

So don't let your account just sit there. Save more with these tips.

1. Set up automatic payday transfers. Make saving easy by setting up automatic transfers from your paychecks to your savings account. The transferred money will never hit your checking account, so you'll build the habit of spending less than you earn. You may not even miss the money.

Part of your automatic transfers can go toward an emergency fund, which should be among your highest priorities, along with long-term savings goals and paying off high-interest debt. Having just a few hundred dollars in an emergency fund typically can keep you from going into debt over car troubles or a costly medical bill. Aim for a starter fund of $500 and continue building that safety net until it covers three to six months of living expenses.

2. Switch to a savings account with higher returns. You're not going to make much money from interest in a savings account with the national annual percentage yield averaging 0.06%. But you should be able to find online high-yield savings accounts with returns around 1%.

One percent may not sound like much, but thanks to compound interest, that higher rate makes a difference in the long run. Say you start with a balance of $5,000 in a savings account and contribute $100 a month for 10 years. Including your initial balance, you will have invested $17,000. In that time, a 0.06% APY would yield $66 in interest, while a 1% rate would return about $1,152.

3. Consider opening a certificate of deposit. You'll generally be able to get a higher rate of return from a CD than a traditional savings account. The tradeoff is flexibility. While you can withdraw money from a traditional savings account relatively easily -- six times a month before incurring a fee -- the rules for CDs are more rigid.

The specifics depend on the CD, but generally you agree to keep your money untouched in an account for a set period of time, typically from three months to five years. Usually, the longer the term, the higher the interest rate, with CD rates above 1% at credit unions and online banks. But if you dip into the certificate funds before the term's end, you'll likely pay a penalty -- one that could offset much of the interest accrued.

This plus the fact that many CDs also require a minimum balance means these accounts are best for people who already have an emergency fund and those who can afford to set aside the money for a while. By the time you're able to open that CD, you'll be a savings heavyweight.

Laura McMullen is a staff writer at NerdWallet, a personal finance website. Email: lmcmullen@nerdwallet.com. Twitter: @lauraemcmullen.

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