Bank of America cards are currently not available on CNBC Select and links have been redirected to our credit card marketplace where you can review offers from other issuers like American Express or Chase. You can also check out our list of best credit cards for alternative options.
By your 40th birthday, you're likely more financially stable than you were in your younger years — and hopefully that gives you the opportunity to achieve big goals like buying a home and growing your family.
But it's important not to lose sight of future goals, including saving for retirement.
To retire by age 67, experts at retirement-plan provider Fidelity Investments suggest having three times your income saved by the time you turn 40. This guideline includes your cash savings, retirement contributions and any investments.
If you feel overwhelmed with how to get there or what to exactly focus on, CNBC Select has some guidance. Below are three good financial habits to develop in your 30s to help you achieve bigger long-term goals.
1. Increase your retirement contributions
There's a good chance that when you land your first full-time job in your 20s, you only put a small percentage of your salary into your 401(k) retirement account.
But your salary has likely increased in your 30s, and as you enter your 40s, see if you can increase your contributions. Generally, financial advisors recommend contributing 10% to 20% of your salary toward your retirement fund.
Make sure you are putting away enough of your paycheck into your 401(k) account to receive any employer matches, if your company provides one. For example, if your company offers a 6% match, try to put at least that much away and increase it a little bit every year.
And if your employer doesn't offer a 401(k)-sponsored plan, consider putting money away in individual retirement accounts like a traditional or Roth IRA.
2. Start saving for your kids' college early
Parents in their 30s shouldn't forget to keep their kids' college savings in mind at the same time they're saving for retirement. College savings for your children might not directly correlate to your own retirement savings, but starting a college fund early on can free up money in the later years and help you avoid paying interest on student loans in the long run.
Consider contributing to a 529 plan to help fund your kids' college education. These offer tax-free withdrawals when the money is taken out to pay for college. And, depending on your plan, you can often claim state tax benefits each year you contribute to your 529 savings account. There are even credit cards that let you put cash back into a 529.
The Bank of America® Premium Rewards® credit card lets parents who have a 529 account with Merrill Lynch put their cash back toward their children's future college education. The Upromise® Mastercard® offers 1.25% cash back on every qualifying purchase, but when you link your card to an eligible 529 College Savings Plan, you'll earn 15% more on the money you deposit.
3. Put your money into a high-yield savings account or CD
As you near 40, you most likely have a savings account. But it may not be the best one for earning you the most money.
A high-yield savings account offers interest rates much higher than a traditional savings account and allows you easy accessibility to your cash should you ever need it. Using a high-yield savings account in combination with investment accounts helps you stretch your dollars further.
For the best opportunity to earn a high return, check out the Varo Savings Account. The all-mobile bank offers a uniquely tiered APY program that encourages customers to save more, and it has two savings programs that automatically transfer money from your Varo bank account to your savings account.
Varo Savings Account
Annual Percentage Yield (APY)
Start earning 1.00% APY, then qualify to earn 3.75% APY on your balance up to $5,000.00 by receiving direct deposit(s) totaling $1,000 or more; and end the month with a positive balance in all your Varo accounts. Balances above $5,000 earn 1.00% APY.
Minimum balance
$0.01 to earn interest
Monthly fee
None
Maximum transactions
Up to 6 free withdrawals or transfers per statement cycle
Excessive transactions fee
None
Overdraft fee
None
Offer checking account?
Yes
Offer ATM card?
Yes, if have a Varo Bank Account
Terms apply.
Read our Varo Savings Account review.
Pros
- Two built-in automatic savings tools, Save Your Pay and Save Your Change, make it easy to grow your savings without any extra effort.
- Earn a strong APY on balances up to $5,000 when you meet the qualifying requirements, with a base rate available even if you don’t.
- No minimum deposit, no monthly fees, and no overdraft fees, so nothing is standing between you and your savings goals.
- Option to add a Varo checking account with ATM access, keeping your banking and savings in one place.
Cons
- The higher APY requires at least $1,000 in monthly direct deposits and a positive end-of-month balance to qualify, so it works best as your primary bank.
- Cash deposits are only available through third-party services, which charge a fee, making it less convenient if you frequently deposit cash.
If you are confident socking away money for a few months, or years, without ever touching it, a certificate of deposit (CD) is another savings option that is risk-free. Typically, the longer the term length of the CD, the higher interest you earn on your deposit. CDs come with fixed interest rates for fixed term lengths. While being locked into a certain interest rate guarantees a return, you have to make sure you are OK with keeping your money untouched because early withdrawals come with penalty fees.
Bottom line
If you are near age 40 and don't have 3 times your income saved, don't fret. Make a plan to increase your retirement fund contributions and make sure you're saving money in an account when you earn interest on your funds. If you have kids, it's never too early to start saving for their education and credit cards can help you do so. Small steps can help you make a big dent in your goals.
Information about the Bank of America® Premium Rewards® credit card has been collected independently by Select and has not been reviewed or provided by the issuer prior to publication.
