When making the decision save, it is good to have goals in mind. However, an important part of saving is almost always overlooked – where to keep the money so that it works for you. There are many different types of accounts that you can use to gain interest on your savings account and make your money work for you.
* Savings accounts are available at your local bank. Most banks have different types of savings accounts and rates that vary depending upon the amount that is deposited. The annual percentage rates are usually low, with interest being paid quarterly. If you are looking for a long-term, high interest yielding investment, you might want to skip the savings account in favor of a certificate of deposit.
* Certificates of deposits, or CDs, are a type of investment tool that requires the investment to be held for a specific time frame. If you invest in a certificate of deposit, your money will be on hold until the time expires. You will be able to withdraw the money early, but a penalty will apply. Interest will be credited according to the agreement, but all interest will be lost if the withdrawal is made before the CD matures. Placing your money in a CD is not a good idea if you wish to have unlimited access to the money.
* Savings bonds are a type of bond that is issued by the government. They are backed 100% and typically take 20-30 years to mature with interest accumulating every month. However, they can be cashed in at any time with no penalty; you just will not earn the extra interest. Savings bonds can be purchased online as well as through your bank.
* IRAs are designed for retirement. Investments are typically held until the depositor reaches retirement age. The money will hold a severe penalty if withdrawn early, but there are exceptions. Taking money out for educational purposes or buying a house, for example, are not penalized.
* Money markets are held at your local bank as well. Money markets usually require higher balances and the access to the money is limited, although not as limited as a CD. Most money market accounts allow only a limited number of withdrawals per period, usually per quarter. The plus side of a money market is that it tends to yield higher interest due to the higher amounts required for deposit.
There are many different types of savings methods available. There is no wrong way to invest your money. A typical low interest yielding savings account is good if you want unlimited access to your money. If you are interested in investing long term only, you might consider a savings bond or an IRA. Whichever route you decide to go, do your research first so you know exactly what to expect. You can always change your mind at a later date, although you may pay a penalty.
For some of us, budgeting is second nature. For others, it seems a nearly impossible task. There are just so many things to consider that it’s hard to decide where your funds should go.
Setting priorities makes budgeting much simpler. But even this is difficult for many household money managers. Priorities are somewhat subjective, and those within the household often have vastly different priorities. Here are some ways that you can make priority setting a little easier:
1. Keep first things first. When it comes down to it, there are only a few things that we truly need to survive. These things include food, water, clothing and shelter. Transportation and other things that enable us to work and continue to make money also fall into this category. These should always come first in the budget, although it’s always a good idea to do our best to save money on them.
2. Keep savings in mind. We all need to put money aside for emergencies and set up a retirement fund. It’s also wise to set up a college fund for each of your children as early as possible. But many families push savings to the side, and it often ends up out of the picture altogether. Putting money away prior to any discretionary spending is crucial if you wish to meet your goals.
3. Evaluate your debts. If you have none, you’re in the lucky minority. Most households have large amounts of debt, including mortgages, car payments, loans and credit cards. By paying your debts off as quickly as possible, you can save lots of money in the long run. And once they’re paid in full, you’ll have a lot more wiggle room in your monthly budget. Putting as much money as you can afford toward paying off debt will help you reach that point much faster.
4. Set goals as a family. Maybe you would all like to go on a nice vacation next summer. Get everyone involved in deciding where to go, then calculate your expenses. Get everyone involved in saving money for this goal. Not only will you get to go on a family trip, you’ll also be teaching your children about budgeting and teamwork.
5. Review your budget periodically. A family’s needs change over time, and if your budget is no longer meeting your needs, it’s time for a change. Once again, you’ll need input from everyone in the family to make this work.
Priorities are at the heart of a successful budget. By keeping them in mind, we can resist impulse spending and make progress toward our financial goals. And by getting input from the entire family, you can gain valuable insight into individual needs and encourage interest in working together to keep your finances in good shape.
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