Tips for Choosing the Right Savings Account

The reasons for saving are as varied as the types of accounts you will find at financial institutions. People set aside money for emergencies or for future major purchases. Others save for a child’s education or retirement. Knowing the reason for having a savings account will help you choose the type you need, along with these tips for choosing the right savings account.

Consider one of the following types of accounts when you’re searching for a new savings account:

• Certificates of Deposit (CDs) – CDs are best for those leaving their money for short periods of time, as little as one month up to five years. The longer you leave the money in the CD, the higher payout you will receive. There are penalties for early withdrawal; if you know you won’t need your money for a while, a CD might be a good option for you.

• Money Market Funds (MMFs) – A good choice for an “emergency fund,” the MMF allows the owner to access the money through check-writing privileges, if the need arises. They are as safe as a bank money market account, but may earn more interest than a money market account.

• Money Market Accounts (MMAs) – This type of account would also be viable as an emergency fund. They are insured by the FDIC, and interest rates are usually competitive with MMFs. You may be able to access your MMA account online through your regular check account.

• Ultra Short-Term Bond Funds – This type of account carries more risk. In fact, instead of earning interest, you may actually lose money. If having a certain amount of interest added to the money you’re saving is important, a CD would be a much better choice. The possibility of earning more interest is there, but these accounts tie up your money from six to twelve months.

• Short-Term Bond Funds – If you know you won’t need your money for two to three years, the short-term bond fund is a good option. They take longer to mature but this type of bond will receive higher yields. The downside, however, is that the funds may fall if the interest rates rise. Weigh the risk against the possible gain to determine if this account is for you.

• Mortgage-Backed Bond Funds – Often referred to as Ginnie Mae funds, these funds are invested in mortgage-backed securities. They are very sensitive to the changes in the prime interest rate and can easily lose money if funds are removed prior to maturity. Keeping the money in this fund for the duration will allow it to earn the most money. Expect these funds to be tied up at least three years.

You may also find online savings account through institutions other than your local bank. These accounts, however, may require you to deposit more initially. They may also require additional fees for keeping the account for you, and they may require a higher balance. For these reasons, an online account may not be the best choice.

Research the various types of savings accounts. Then follow these tips for choosing the right savings account for you. You just might find that your local bank has what you’re looking for and what will bring you the most return for your money.

How to Plan for Future Expenses

Many people live from paycheck to paycheck, never quite sure if they have enough money to cover their bills. Living this kind of lifestyle makes planning for future expenses like emergencies or a new car extremely difficult. However, these big expenses do pop up from time to time and if you’re not prepared, it can be an extremely stressful event. Here are some tips on how to plan for the future and save money for the little and the big expenses.

• Step 1: Create a budget, or call it a spending plan if you prefer. A budget simply tells you how much you are spending on certain items in your life. It gives you control over your spending and cash flow, and helps you know where you can cut back.
• Step 2: Create spending goals. How much you spend on the majority of expenses in your life is up to you. You don’t have to spend $1000 a month on going to the movies. When you create a spending goal, you begin to control your money in a positive way.
• Step 3: Create savings goals. Include both short-term and long-term savings goals. Short-term goals give you more immediate satisfaction, like saving for a new coat or a vacation. Long-term goals like college fees or retirement are important too. Both types of goals will have time lines and a planned amount to save each month. For example, if you’re saving for a family vacation your goal may be to put away $200 every month for two years.
• Step 4: Create a separate savings account for your goals. If your savings and your checking mingle, then you run the risk of using your savings to pay for bills or things you want to buy.
• Step 5: Put away money for emergencies. This is particularly important in this day and age where people can get laid off from their jobs, or businesses can go under without notice. And if you’re self-employed, a savings is particularly important. Experts advise to have a minimum of six months salary set aside just in case.

Saving money doesn’t have to be a painful process. With the right planning and a good budget, saving money can be a very positive and empowering experience. After all, it’s worth all our time and a little effort to make the future more secure, to provide a good role model for our children, and to enjoy the fruits of our labor.

Reasons for Why Every Family Should Have an Emergency Fund

Long ago, men could expect to work at a job long enough to retire and be given a gold watch for their years of service. They knew that if they started working at a company, they would most likely be working there the rest of their life. Times have changed, however. Job security is a thing of the past. That is one of the reasons every family should have an emergency fund.

There are many reasons to have an emergency fund: your washing machine breaks down and cannot be fixed, you must attend a funeral across the country and have to buy a plane ticket, or you or your spouse get laid off from what you thought was a permanent job. There are reasons every day that cause us to spend money that we hadn’t intended on spending. You could put those bills on credit cards, but you’re only delaying the inevitable. If you have an emergency fund, you may be able to avoid unnecessary debt and sleep a little better at night.

Every family should have an emergency fund, and the sooner you get one started, the better off you will be. Unexpected things happen to everyone. Starting to save money now is a proactive way to prepare for the unexpected when it happens.

Financial experts advise having a minimum three to six months living expenses in an emergency fund. This would include everything that you normally pay out over the course of a month – mortgage, car payments, car and home insurance, groceries, electricity, telephone, and any other bill you might have. If all of your bills add up to $2,000, you would need to save between $6,000 and $12,000 in your emergency fund.

If you’re used to living from paycheck to paycheck, setting aside money for an emergency fund might seem daunting. You can, however, find little ways to save money during the month. Refrain from eating out. Depending on the size of your family, that could save you $25 or more each meal. Don’t go out for movies and popcorn. That would be an additional $30 or more savings. Take any money you would spend on luxuries and put it into savings. It’ll take a while to build the fund up, but you’ll be so glad you did.

After you have started an emergency fund, how do you determine an adequate reason for getting money out of it? If your car breaks down and it will cost more than you have available in your regular account, by all means use the emergency fund. What happens if your air conditioner breaks in the middle of an oppressively hot summer? Yes, that constitutes an emergency. Go ahead and use some of the money you have saved up.

The reason every family should have an emergency fund is to avoid taking money out of their normal budget or putting more money onto credit cards. Emergencies happen and can wreck havoc on a family budget. By having an emergency fund set up, handling emergencies will be easier and will cause you much less stress. And it won’t take you into financial ruin should an emergency happen to you.